The rapid rise and fall of Bitcoin: Large institutional liquidity hunting strategies

Source: BlockMedia Original Title: “Bitcoin’s sharp fluctuations, was it a deliberate correction?”…Caught in liquidity hunting – On-chain analyst Original Link: Bitcoin experienced rapid rise and fall in a short period, showing intense volatility. Some analysts believe that this price fluctuation is not merely due to market psychology but is the result of large traders’ “liquidity hunting” strategies. Through on-chain data and trading flow analysis, typical operation patterns such as intentional buy-in inducement and liquidation traps followed by selling can be identified.

Short-term intense volatility

On December 17 (U.S. time), Bitcoin quickly rebounded to $90,000 within an hour, then immediately dropped to $86,000, forming a rollercoaster-like fluctuation of nearly $4,000 in one day. During this process, approximately $120 million in short positions were forcibly liquidated, followed by $200 million in long positions also being forcibly liquidated, causing a strong market impact.

Synchronous large-scale capital flows

Notably, at the same time as the price movement, large-scale fund transfers occurred simultaneously in major exchanges and institutional wallets. On-chain analysts pointed out that institutional wallets such as Wintermute, a leading exchange, and a compliant platform were actively moving funds during the same period. The transferred Bitcoin mainly flowed into inter-exchange transfers and market buy orders.

Typical liquidity hunting strategy

In fact, in the order books of exchanges at the same moment, a large number of market buy orders flooded into specific ranges, causing the price to rise rapidly in a short period. This triggered forced liquidation of short positions. However, the upward momentum did not last, and a large number of sell orders appeared, pushing long positions into liquidation zones. Experts explain this liquidity hunting strategy as: under leveraged, unilateral concentration, using weak liquidity to push up prices, induce liquidations, and then cash out on the inflow of long positions.

Manifestation of structural trading strategies

On-chain analysts pointed out that the consistency between the timing of fund inflows from institutional wallets into exchanges and the price reversal suggests possible pre-coordinated fund operations. Some experts state that “tactical operations utilizing liquidity and leverage structures” reflect “structural trading strategies behind the scenes that are difficult for ordinary investors to detect through charts alone.”

Internal market structural vulnerabilities

Overall, this volatility was not triggered by news or external events but was a result of targeted trading exploiting internal market structural vulnerabilities. Market observers suggest that during periods of rapid short-term price swings, attention should be paid to structural indicators such as liquidity, open interest, and financing rates, rather than just position changes.