Here’s what could happen if bitcoin breaks below $60,000

Bitcoin (BTC) is facing a significant downturn, with the price rapidly approaching the $60,000 mark amidst a surge in ETF outflows. Analysts have pointed to the $60,000 level as a crucial support level, warning that a drop below this point could trigger further selling pressure.

Jean-David Péquignot, the chief commercial officer at Deribit, a leading crypto options exchange, emphasized the importance of the $60,000 threshold for institutional investors and derivatives market participants. He noted that many institutional players had entered the market at prices ranging from $60,000 to $67,000 over the past year, making this range a critical cost basis for these investors.

As BTC hovers around this cost basis, investors are facing the prospect of unrealized losses if prices continue to decline. Péquignot highlighted the potential for rushed selling as investors seek to avoid mounting losses, especially in the face of a bullish trend in AI stocks and traditional markets.

Michael Saylor, the executive chairman of MicroStrategy, a prominent bitcoin holder, also attributed BTC’s recent losses to capital rotation within the market.

In the derivatives market, concerns are mounting as over $1.2 billion in notional open interest is concentrated at the $60,000 strike put options on Deribit. These put options act as a hedge against further downside, but market makers holding short positions on these options may be forced to sell BTC or futures to balance their books as prices approach $60,000. This selling pressure could exacerbate the downward momentum in the market.

Additionally, the presence of leveraged long positions in the system raises the risk of further liquidations in the event of a break below $60,000. Péquignot warned that a cascade of automated long liquidations could be triggered, further intensifying the selling pressure.

It is worth noting that billions of dollars in leveraged long positions have already been liquidated this week, underscoring the fragility of the current market conditions. As BTC teeters on the brink of the $60,000 support level, investors are bracing for a potential escalation in selling pressure and heightened market volatility.