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Bitcoin fell from its record highs north of $60,000 to $54,588.83 Monday morning following massive ... [+] liquidations. Market analysts disagree over the source of withdrawals.

It turns out last weeks bitcoin rally to the new record high of $61,923 reached on Saturday, was short-lived, with the crypto descending below 55,000 Monday morning.

The cryptocurrency fell as low as $54,588.83 and made a small bounce to $56,689 at press time, according to cryptocurrency data provider Messari.

The plunge came as a result of an aggressive sell-off as 185,350 trades worth approximately $2.22B were liquidated by crypto exchanges in the last 24 hours, mostly in bitcoin, according to Bybit, a cryptocurrency futures trading and information platform. Binance and Bybit exchanges saw the largest withdrawals. The largest single liquidation order of $18.94 million worth of bitcoin occurred on the Huobi exchange.

Analysts have been suggesting different scenarios behind the dump. According to Justin Barlow, research analyst at cryptocurrency data provider The TIE, a large deposit of roughly 18,000 BTC worth over $1 billion dollars was made to a hot wallet of cryptocurrency exchange Gemini, suggesting that an institutional holder may have been taking profits or exiting the market.

Time of bitcoin deposit to the Gemini exchange

Another data and analytics platform Glassnode refuted speculations about bitcoin inflows into Gemini, saying the reported transactions were internal, made with funds that were already on the exchange's wallets.

The mystery around Gemini gets murkier. Apparently, data providers mislabel Gemini into Coinbase or OKEx because they have different clustering algorithms, tweeted Ki Young Ju, CEO of South Korean analytics platform CryptoQuant.com. What's clear is that it's not an internal transfer, and it went to an exchange user deposit wallet.

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More importantly, according to Barlow, the market saw the news of this transfer and this had an impact whether it was from an internal Gemini wallet or not. While this could be treated by the market as a bearish development, its important to note that miners sold over 112,000 BTC in the first week of 2021 while prices actually rose from $29,000 to $40,000, indicating that this exchange inflow/outflow signal may actually be a bad representation of market sentiment, adds Barlow.

Heavy withdrawals seemed to coincide with a Reuters report Sunday evening that India will propose a law banning trade and possession of digital assets. If signed into law, India would be one of the first major economies to make cryptocurrency holdings illegal.

All the while, a wave of institutional interest continues to signal bullish sentiment. Last week, U.S. largest bank, JPMorgan JPM , revealed a new investment product tied to a basket of stocks offering investors exposure to bitcoin. PayPal PYPL , a major force behind increased cryptocurrency adoption, said its currently in the process of acquiring an Israeli crypto custody firm Curv for an undisclosed amount. Earlier this month, Goldman Sachs GS announced its restarting cryptocurrency trading operations and will begin dealing bitcoin futures within the coming weeks.

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$2.2 Billion Bitcoin Liquidation May Have Caused 10% Correction - Forbes