Bitcoin continues to lose ground and the price is fast closing on $60,000 amid record ETF outflows.
The $60,000 level has been widely cited by analysts as a major support, below which the selloff could get even uglier.
Jean-David Péquignot, the chief commercial officer at leading crypto options exchange Deribit said that price is critical not just because it's a round-number psychological level. More importantly, it's a structural threshold with real consequences for institutions and derivatives market participants.
According to Péquignot, a significant chunk of institutional money — comprising ETF buyers, large holders and short-term speculators — bought bitcoin at prices between $60,000 and $67,000 over the past year.
With the largest cryptocurrency now trading within that range, these buyers are sitting at or near their cost basis, essentially at break-even. If prices drop further, unrealized or paper losses will mount and holding becomes expensive, especially when AI stocks and other parts of the traditional market are rallying like there is no tomorrow.
"As price undercuts their cost basis, the resulting unrealized losses may incentivize rushed selling, especially as the opportunity cost of holding BTC rises against a surging AI equity sector," he said.
Michael Saylor, the high-profile executive chairman of Strategy (MSTR), the largest publicly traded bitcoin holder, also blamed capital rotation for recent BTC losses.
Things become mechanical after that.
On Deribit, there is over $1.2 billion in notional open interest sitting at the $60,000 strike put options, which pay out if prices fall below that level. Investors have bought these as a hedge against a protracted selloff.
The problem, however, is that market makers, who are on the opposite side of the investors, are now short puts, or more precisely, "short gamma."
So, as BTC nears $60,000, market makers and dealers will be forced to sell spot BTC or futures to balance their books. Other things being equal, this hedging can accelerate the selloff, turning an orderly decline into a chaotic one, Péquignot said.
He also pointed out that there are too many leveraged longs in the system, and a break below $60,000 could lead to more liquidations, adding to downside momentum.
"With leverage still not fully flushed from the system, a break of $60K could rapidly worsen collateral metrics, triggering a cascading wave of automated long liquidations," he said.
Note that billions of dollars of leveraged longs, or bullish plays tied to BTC and other tokens, have already been liquidated this week.