A wave of leveraged long liquidations has exposed bitcoin stock sensitivity, according to Wall Street bank Citigroup.
The bank said worsening trade tensions between the United States and China triggered a sharp futures sell-off on Friday that spread to cryptocurrencies, underscoring their volatility and correlation with stocks.
Since then, both the cryptocurrency and stock markets have recovered some losses, the report notes. The world’s largest cryptocurrency was trading around $111,700 at the time of this publication.
A violent flash crash hit crypto markets on Friday, wiping out more than $500 billion in value and forcing nearly $20 billion in liquidations on derivatives platforms. Bitcoin fell as much as 13% in an hour, before bottoming out near $102,000.
Citi said exchange-traded fund (ETF) inflows remained resilient, likely driven by newer, less leveraged investors, and it does not expect selloffs to derail demand.
Bitcoin and ether remain near September levels, and the bank maintained its 12-month targets of $181,000 for BTC and $5,400 for ETH, with year-end forecasts of $133,000 and $4,500.
Citi said sustained ETF flows support the base case, while the bear case depends on stock market weakness.
Read more: Bitcoin ETF Inflows Set to Break Records in Q4, Says Crypto Asset Manager Bitwise
