bitcoin continues to lose ground and the price is rapidly approaching $60,000 amid record ETF outflows.
Analysts have widely cited the $60,000 level as important support, below which the sell-off could turn even uglier.
Jean-David Péquignot, chief trading officer of major crypto options exchange Deribit, said price is crucial not only because it is a psychological level of round numbers. More importantly, it is a structural threshold with real consequences for institutions and derivatives market participants.
The cost base problem
According to Péquignot, a significant portion of institutional money (comprising ETF buyers, large holders, and short-term speculators) purchased bitcoins at prices between $60,000 and $67,000 over the past year.
Since the largest cryptocurrency is now trading within that range, these buyers are at or near their cost base, essentially breaking even. If prices fall further, unrealized or paper losses will accumulate and will become expensive to hold, especially when AI stocks and other parts of the traditional market are rising like there is no tomorrow.
“As the price undermines its cost base, the resulting unrealized losses may incentivize hasty selling, especially as the opportunity cost of holding BTC rises in the face of a growing sector of AI stocks,” he said.
Michael Saylor, the prominent CEO of Strategy (MSTR), the largest publicly traded bitcoin holder, also blamed capital turnover for BTC’s recent losses.
The problem of derivatives
After that, things become mechanical.
On Deribit, there is more than $1.2 billion in notional open interest on the $60,000 strike put options, which pay out if prices fall below that level. Investors have bought them as protection against a prolonged sell-off.
The problem, however, is that the market makers, who are on the opposite side of investors, are now short puts, or more precisely, “short.”
So, as BTC approaches $60,000, market makers and dealers will be forced to sell BTC spot or futures to balance their books. All things being equal, this coverage can accelerate the sell-off, turning an orderly decline into a chaotic one, Péquignot said.
He also noted that there are too many leveraged long positions in the system, and a break below $60,000 could trigger more liquidations, increasing bearish momentum.
“Since leverage has not yet been completely removed from the system, a breakout of $60,000 could rapidly worsen collateral metrics, triggering a cascading wave of automated long liquidations,” he said.
Note that billions of dollars in leveraged long positions, or bullish plays tied to BTC and other tokens, have already been liquidated this week.
