Citi: Bitcoin Sentiment Determined by Leveraged Liquidations

Citigroup Maintains Year-End Predictions for Bitcoin and Ethereum

Citigroup announced that the tension between the United States and China triggered a significant wave of leveraged long liquidation in the cryptocurrency markets. This situation highlighted Bitcoin’s (BTC) sensitivity to stock market sentiment. The sharp futures sell-off that occurred last Friday spilled over into the cryptocurrency markets, showcasing the volatility and correlation with stocks.

According to the report, both the cryptocurrency and stock markets managed to recover some of their losses. As of the time this news was prepared, Bitcoin was trading at approximately $111,700. However, an abrupt drop on Friday led to a loss of over $500 billion in the cryptocurrency market and more than $20 billion in liquidations. Bitcoin experienced a %13 decline within an hour, dropping to the $102,000 levels.

Nevertheless, Citigroup noted that inflows into exchange-traded funds (ETFs) remained strong, likely supported by newer, less leveraged investors. The bank does not expect these liquidations to negatively impact demand. Bitcoin and Ethereum continue to trade near September levels. The bank maintains a 12-month target of $181,000 for Bitcoin and $5,400 for Ethereum, while setting year-end forecasts at $133,000 and $4,500, respectively. Citigroup emphasized that sustained ETF inflows provide support in the base case, but the bear scenario is contingent on weakness in the stock market.