Leveraged Liquidations Underscore Bitcoin’s Equity Sensitivity, Citi Says
A tidal wave of leveraged long liquidations has brutally exposed bitcoin's raw, unvarnished sensitivity to traditional equity markets, a connection Wall Street behemoth Citigroup is now forced to acknowledge. The trigger, according to the bank's analysis, was a sharp deterioration in U.S. -China trade tensions, which ignited a furious futures selloff on Friday that didn't just ripple but cascaded directly into the crypto sphere, serving as a stark reminder of the asset's inherent volatility and its deepening, perhaps inescapable, correlation with the whims of the stock market.While both crypto and equities have since managed to claw back some of those staggering losses, the event was a gut-check; at one point, the world's premier cryptocurrency, Bitcoin, was trading around $111,700, a figure that belies the sheer violence of the preceding hours. That violent flash crash didn't just dip a toe—it plunged the entire crypto market into a red abyss, vaporizing over half a trillion dollars in total market value and forcibly ejecting nearly $20 billion in leveraged positions from derivatives platforms in a spectacular display of carnage.Bitcoin itself was mauled, shedding a breathtaking 13% of its value in a single, heart-stopping hour, its price cratering to a low near $102,000 before finding any semblance of a floor. Yet, amidst this bloodletting, Citi points to a single, stubbornly resilient lifeline: exchange-traded fund (ETF) inflows.These inflows, the bank suggests, are likely being powered by a new breed of investor—less experienced, perhaps, but crucially, less levered and therefore less prone to panic-induced selling. This is the new bedrock of demand, and Citi doesn't believe this liquidation event, however dramatic, will be the thing that derails it.The fact that both Bitcoin and ether have managed to hold their ground near September's levels seems to support this thesis, giving the bank enough confidence to reaffirm its audacious 12-month targets of $181,000 for BTC and $5,400 for ETH, with year-end forecasts sitting at $133,000 and $4,500, respectively. But let's be clear about what's really being said here.Citi's so-called 'base case' is entirely contingent on these sustained ETF flows—a bet on the continued institutionalization of Bitcoin, on its slow, grinding march into the portfolios of pension funds and retirement accounts. Their 'bear case,' however, reveals the uncomfortable truth they're dancing around: it depends entirely on equity market weakness.This isn't just a correlation; it's a tether. For all the talk of Bitcoin as a decentralized, non-sovereign safe haven, this episode proves it remains, for now, a high-beta tech stock in a digital disguise, its fate lashed to the same macroeconomic winds that buffet Nasdaq.The promise of 'digital gold' rings hollow when a geopolitical spat between superpowers can trigger a half-trillion-dollar wipeout. This is the central contradiction of modern Bitcoin: it wants to be a hedge against the system, but its price discovery is increasingly dominated by the very system it claims to hedge against.The leveraged traders, the ones who got obliterated, were simply the first and most visible casualties in this structural reality. The real test isn't over; it's just beginning.As long as Bitcoin's price action remains this tightly coupled with the S&P 500, every Fed meeting, every inflation print, every shift in treasury yields will send shockwaves through the crypto markets. The liquidations are merely a symptom of the disease, which is a deep and pervasive dependency on the traditional financial engine. Until Bitcoin can truly decouple—a feat that seems more distant after Friday—it will remain a prisoner of equity markets, no matter how many ETFs buy in.
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Ryan Carter123k2 days ago
so much for bitcoin being an uncorrelated asset tbh this just proves it's still tied to the same old market forces
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