Bitcoin continues to lose ground and the price quickly closes at $60,000 amid record ETF outflows.
The $60,000 level has been widely cited by analysts as major support, below which the selling could become even more brutal.
Jean-David Péquignot, chief commercial officer of leading crypto options exchange Deribit, said the price is not only critical because it is a round psychological level. More importantly, it is a structural threshold with real consequences for institutions and derivatives market participants.
The cost basis problem
According to Pquignot, a significant portion of institutional money – made up of ETF buyers, large holders and short-term speculators – has purchased Bitcoin at prices between $60,000 and $67,000 over the past year.
With the largest cryptocurrency now trading in this range, these buyers are at or near their base price, essentially breaking even. If prices continue to fall, unrealized or paper losses will increase and holding will become expensive, especially when AI stocks and other parts of the traditional market rally like there is no tomorrow.
“As prices undercut their cost basis, the resulting unrealized losses may incentivize hasty selling, especially as the opportunity cost of holding BTC rises in the face of a booming AI stock sector,” he said.
Michael Saylor, high-profile executive chairman of Strategy (MSTR), the largest publicly traded Bitcoin holder, also blamed capital turnover for BTC’s recent losses.
The problem of derivatives
Then things become mechanical.
On Deribit, there is more than $1.2 billion in notional open interest on $60,000 strike puts, which pay out if prices fall below that level. Investors bought them to protect against a prolonged selloff.
The problem, however, is that market makers, who are on the opposite side of investors, are now short puts, or more precisely “short gamma.”
So, as BTC approaches $60,000, market makers and dealers will be forced to sell BTC in spot or futures contracts to balance their books. All things being equal, this hedging can accelerate the sale, turning an orderly decline into a chaotic one, Pequignot said.
He also pointed out that there were too many leveraged long positions in the system and that a break below $60,000 could lead to more liquidations, strengthening the bearish momentum.
“With leverage not yet completely eliminated from the system, a $60,000 breakout could quickly deteriorate collateral metrics, triggering a cascading wave of automated long liquidations,” he said.
Note that billions of dollars of leveraged long positions, or bullish plays tied to BTC and other tokens, have already been liquidated this week.
