Bitcoin: How leverage turned a rise into a cascade of falls in just a few hours

December 17th was a day of sharp Bitcoin price movements – within less than an hour, BTC surged over 3000 dollars, only to sharply fall back to around 86,000 dollars. All this chaos had nothing to do with market news. It was purely a technical drama: concentrated leveraged positions, weak liquidity, and a domino effect of liquidations.

The cluster of short positions called on traders

It all started when Bitcoin approached a psychological magic number. 90,000 dollars – this is not just a number, it’s a resistance wall that catches every trader’s attention. Below this level lay a dense network of leveraged short positions, waiting for a wake-up call.

When the price started rising, these short positions became ticking time bombs. To close them, systems were forced to buy Bitcoin, which further pushed up the price. This is a classic scenario known as a short squeeze – forced buying generates itself. As a result, about $120 million in short positions were liquidated.

The problem was that this move was entirely driven by momentum, not by actual demand in the spot market. It was a fragile construct ready to collapse.

New long positions attract new players – until the market changes

When Bitcoin hit 90,000 dollars, fresh players entered the scene. The momentum looked unstoppable. Many opened leveraged long positions, betting that the rise would continue.

But it didn’t.

When spot demand waned and the price started falling, the system automatically triggered a wave of liquidations. $200 million in long positions were closed by forced liquidations – and it hit the market like a tsunami. Within a few hours, Bitcoin retreated to 86,000 dollars, erasing all previous gains for the average trader.

Exchange positioning shows that the market structure is very fragile

Data from major trading platforms reveal a picture of shifting sentiment. The number of accounts holding long positions dramatically increased before the jump. But here’s the problem: each of these positions was small, uncertain, and vulnerable to liquidation.

When volatility peaked, big players quickly adjusted their strategies. They bought on dips, reinsured, changed direction. The market position structure proved to be weak, easily manipulated by price movements.

A combination – a pile of positions, high leverage, torn convictions – creates a market that can explode almost without warning.

Were these whales or Market Makers? The data say “not necessarily”

Bitcoin movements between platforms by well-known market makers were recorded. But simultaneity is not proof of manipulation. It could have been routine reinsurance, margin management, or simply providing liquidity.

The reality is more boring than conspiracy theories: what happened can be explained by simple market mechanisms – a cluster of liquidations, high leverage, a small order book. There are no clear signs of a coordinated attack.

What does this say about the future?

Bitcoin’s fundamentals did not change that day. But the market changed dramatically. Leverage is too high. When prices oscillate sharply, liquidity disappears in the blink of an eye. Resistance levels become traps for liquidations.

Until traders reduce their leveraged positions to healthier levels, similar explosions may recur. This is not a game of fundamentals – it’s a game of market structure and trader psychology.