Bitcoin fluctuated by nearly 100 billions of dollars within just a few hours—what exactly happened?
On December 17, Bitcoin experienced extreme volatility, surging by more than $3,000 in less than an hour before sharply retreating to around $86,000.
This dramatic fluctuation was not triggered by any major news event. Instead, market data shows that the volatility was driven by leverage, positions, and fragile liquidity conditions.
Short Squeeze Pushes Bitcoin Price Higher
Bitcoin’s initial rally began as it moved toward its target direction. The $90,000 level is a major psychological and technical resistance zone.
Liquidation data revealed a dense cluster of leveraged short positions above this level. As the price rose, these short positions were forced to close. This process required buying Bitcoin, which further pushed the price higher.
During the price surge, approximately $120 million in short positions were liquidated. This created a classic scenario: a short squeeze where forced buying accelerated the trend beyond what normal spot demand could support.
At this stage, the move appeared strong, but the underlying structure was quite fragile.
The Rally Turns into a Prolonged Cascade of Liquidations
As Bitcoin briefly rebounded to $90,000, new traders entered the market, chasing momentum.
Many traders opened leveraged long positions, betting that the breakout would continue. However, this rally lacked sustained spot buying and quickly stalled.
When the price began to fall, these long positions became extremely vulnerable. Once key support levels were breached, exchanges automatically liquidated them. $200 million in long liquidations followed, and the market was completely overwhelmed.
The second wave explains why the decline was faster and deeper.
Within a few hours, Bitcoin’s price fell back to around $86,000 (UTC+8), erasing most of its gains.
Positioning Data Shows Fragile Market Structure
Position data from traders on Binance and OKX helps explain why this move was so violent.
On Binance, the number of trading accounts holding long positions increased significantly before the price surge. However, position size data showed that these traders’ confidence had weakened, indicating that many traders held long positions, but the position sizes were not large.
On OKX, the position ratio changed dramatically after the volatility. This indicates that, on OKX, the position-based ratio fluctuated sharply after the move. Large traders quickly adjusted their positions, either buying the dip or adjusting hedging strategies during the liquidation process.
This combination—crowded positions, divergent convictions, and high leverage—created a market that could swing violently with almost no warning.
Was This Move Manipulated by Market Makers or Whales?
On-chain data shows that market makers like Wintermute frequently moved Bitcoin between different exchanges during the volatility. These transfers occurred simultaneously with price swings, but this does not prove market manipulation.
Market makers typically rebalance inventories during periods of market stress. Funds deposited to exchanges may indicate hedging, margin management, or liquidity provision, and do not necessarily mean selling during price crashes.
Importantly, the entire process can be explained by known market mechanisms: concentrated liquidations, high leverage, and thin order books. There is no clear evidence of coordinated manipulation.
What This Means for Bitcoin’s Future
This episode highlights the main risks in today’s Bitcoin market.
Leverage remains high. When prices move quickly, liquidity can evaporate rapidly. Forced liquidations may dominate price action as prices approach key levels.
Bitcoin’s fundamentals did not change during those hours. The price swings reflected market structure vulnerabilities, not a shift in long-term value.
Until leverage is reset and positions are adjusted to healthier levels, similar violent swings remain possible. For now, Bitcoin’s wild price swings were not triggered by news events.
The volatility occurred because leverage pushed prices in a direction unfavorable to itself.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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