Crypto Assets analyst James Check described the recent market crash as a “2σ long-term liquidation event,” which wiped out “a large number of gambling addicts.” Bitcoin fell more than $24,000 in just ten days, hitting its lowest point in seven months at around $82,000 on November 21. He warned that there could be further waves of selling, potentially dipping down to the $70,000 range.
James Check Interpretation: Statistical Significance of 2σ Liquidation Events
(Source: James Check)
The 2-sigma liquidation event in Crypto Assets refers to significant market volatility that triggers large-scale liquidations of leveraged positions. “2-sigma” (two standard deviations) indicates the statistical magnitude of price fluctuations. In a normal distribution, the probability of events occurring within 2 standard deviations is about 95%, meaning that fluctuations beyond this range are considered statistical “extreme events,” with a probability of only about 5%. Bitcoin's recent plunge of $24,000 within ten days, with a drop of over 22%, is precisely this rare extreme volatility.
James Check described this market crash as eliminating “a large number of gambling addicts.” Although this statement is sharp, it accurately reflects the market reality. During the process of Bitcoin rebounding from $82,000 to $106,000, a large number of retail investors and speculators used high leverage to go long, expecting Bitcoin to quickly break through $110,000 or even $120,000. These high leverage positions became the most vulnerable link when the market suddenly reversed, with a large number of longs being forcibly liquidated for every 1% drop in price, and the liquidations further pressured the price down, forming a vicious cycle.
Most of the leverage has disappeared. From the derivatives data, it can be seen that the open interest has significantly decreased during the sharp decline, and the financing rate has also retreated from a high level to near neutral levels. However, Check warns that the market “has an astonishing sense of smell, able to sniff out the last stubborn elements.” This statement is based on a profound understanding of the market microstructure: even if most of the leverage has been cleared, there will always be a small portion of leveraged positions that survive due to higher collateral rates or stronger margin call capabilities. The market often tests the bottom line of these residual leverages through further volatility until they are completely cleared.
Check stated: “If we ultimately reduce the scale of funds to the range of 70,000 to 80,000 USD to clear the last leverage space, we wouldn't be too surprised.” This prediction implies that Bitcoin may still have a further 10%-15% fall space. The range of 70,000 to 80,000 USD is not only a dense support area from a technical perspective, but also a concentration area for the liquidation prices of many leveraged long positions. Only when the price reaches this range and completes the final round of liquidations can the market truly finish deleveraging, creating conditions for the next healthy upward movement.
SignalPlus: Oversold Rebound and $78,000 Key Support
Augustine Fan, the Insights Director of the crypto trading software service provider SignalPlus, told Cointelegraph that the cryptocurrency market is showing initial signs of stabilization after last week's severe dumping and may have hit a bottom rebound. She stated, “From a market sentiment and technical perspective (such as Bollinger Bands), the market is currently severely oversold, and unless there are new exogenous factors (such as a DAT forced sell), prices may have already reached a local low.”
Bollinger Bands are a classic technical indicator for measuring price volatility and overbought/oversold conditions. When the price touches or falls below the lower Bollinger Band, it is often seen as an oversold signal. When Bitcoin dipped to $82,000, the price clearly fell below the lower Bollinger Band, indicating excessive selling pressure in the short term. Historically, Bitcoin tends to experience a technical rebound after touching the lower Bollinger Band.
Fan expects the price to be between $82,000 and $92,000, noting that the next important price support level is around $78,000. This range represents the short-term volatility for Bitcoin, with $82,000 being a recent low and a key support level, while $92,000 serves as a rebound target. If the price can stabilize within this range, the market may enter a consolidation phase, building momentum for the next directional breakout.
The support level of 78,000 USD is of significant importance. Fan stated: “If it continues to fall below this area, there may be greater downside potential, but this is not the current baseline expectation scenario.” This price level is close to the key low point of previous adjustments and is also the average cost area of large holdings. From on-chain data, there is a concentration of realized prices around 78,000 USD, indicating that many investors have their costs in this range, and they have a strong motivation to defend when prices dip.
Three Scenarios for Bitcoin's Short-Term Trend
Optimistic Scenario: Maintain support at $82,000, rebound to $92,000, and enter a consolidation phase.
Neutral Scenario: Fluctuating between 78,000 and 92,000 USD, waiting for clarity in direction.
Pessimistic Scenario: If it falls below $78,000, it will trigger James Check's warning for the final liquidation between $70,000 and $80,000.
Whales continue to sell, hindering the confirmation of trend reversal
Analysts from blockchain data provider CryptoQuant have found that the market has bottomed out and rebounded, which could lead to a more sustained recovery. “On-chain data shows that the market is influenced by institutional redistribution, structural weaknesses, and a rebound that may indicate a local bottom,” analyst Camelo Aleman said on Tuesday. However, he added that the key whale group holding 1,000 to 10,000 Bitcoins is still dumping, which hinders the full confirmation of a trend reversal.
Whale behavior has a decisive impact on the Bitcoin market. Addresses holding between 1,000 and 10,000 Bitcoins typically represent early investors, miners, or institutional investors, whose selling is often based on long-term market trend judgments rather than short-term emotional fluctuations. When this group continues to reduce their holdings, it indicates that they believe the current price is still too high, or they expect the market to dip further. The flow of this smart money is of significant reference value to retail investors.
On-chain data shows that the holdings of these whale addresses have been continuously declining over the past few weeks. Even during the rebound of Bitcoin from $82,000 to $88,000, they are still taking advantage of the rebound to reduce their positions. This behavior pattern is similar to the situation before the peak of the bull market in 2021, when whales continuously sold near $60,000, while retail investors crazily bought in driven by FOMO, ultimately leading the market to enter a long-term bear market after peaking at $69,000.
Alemann pointed out: “The recovery prospects are promising, but the end of the bear market phase requires a significant change in whale behavior.” This means that even if technical indicators show overselling, and a rebound occurs in the short term, as long as whales continue to sell, the market will struggle to form a sustained upward trend. A real bottom confirmation requires whales to stop reducing their holdings or even start increasing them, and this behavioral change usually occurs when prices have fully adjusted, and valuations are attractive enough to attract long-term capital into the market.
From this perspective, the warning level of $70,000-80,000 predicted by James Check might be the price level at which whales are willing to stop dumping and even start accumulating. If Bitcoin truly falls to this range, it could not only clear the remaining leverage but also potentially trigger buying support from whales, forming a true market bottom. This “double cleansing”—both clearing leverage and floating capital—often serves as a necessary process before the restart of a bull market.
Leverage Liquidation Mechanism and Market Microstructure
The mechanism of Bitcoin leverage liquidation is key to understanding current market risks. When traders use 5x leverage to go long, the margin rate is only 20%. If the price of Bitcoin falls by 15%, the loss reaches 75%, close to the liquidation line. The exchange will forcibly liquidate to protect the interests of lenders, and the selling pressure generated by liquidation will further lower the price, triggering the liquidation of the next batch of leveraged positions. This chain reaction is known as the “liquidation waterfall.”
The destructive power of a 2σ liquidation event lies in its systemic nature. When price fluctuations exceed two standard deviations, a large number of leveraged positions simultaneously hit the liquidation line, leading to an instant depletion of market liquidity, where buy orders cannot absorb the enormous selling pressure, causing prices to fall rapidly. This time, Bitcoin dropped from $106,000 to $82,000, which is a typical manifestation of this mechanism. The “last stubborn faction” in the Check warning refers to those leveraged positions with a higher collateral rate that have not yet been liquidated but are already close to the danger zone; they require further price declines to be completely cleared.
