Bitcoin’s leveraged bulls could face a major shakeout if BTC falls toward $57,000, a level that may trigger a wave of forced liquidations.

Bullish futures traders have accumulated sizable positions while market liquidity has become thinner. That setup could make a downside move more severe if Bitcoin loses key support.

The $57,000 area is important for two reasons: it served as a major support zone during Bitcoin’s June recovery, and it could also be where losses on leveraged long positions become large enough to force exchanges to close them.

$57,000 Emerges as a Liquidation Risk

Futures traders use leverage to control positions larger than their initial collateral. The strategy can magnify gains when prices rise, but it also accelerates losses when the market moves in the opposite direction.

When losses reduce a trader’s margin below the required level, the exchange can automatically close the position. Such liquidations can create additional selling pressure and push prices lower.

For Bitcoin’s current leveraged longs, a move toward $57,000 could place a large number of positions at risk unless traders add more collateral.

Joao Wedson, CEO of crypto analytics firm Alphractal, described $57,000 as a crucial level and warned that Bitcoin reaching the area could result in a substantial wave of long liquidations.

Thin liquidity adds another layer of risk. CoinDesk recently reported that open futures positions are unusually large compared with trading volume.

If numerous long positions are liquidated simultaneously, shallow order books may be unable to absorb the selling smoothly. That could turn a gradual decline into a rapid sell-off.

Bitcoin Could Face Another Leg Lower

Historical bear markets show just how severe Bitcoin’s declines can become, with previous cycles producing drawdowns between 76% and 84%.

Bitcoin’s current downturn began after it reached above $126,000 last October. The cryptocurrency has since lost roughly half its value, raising the possibility of another major decline if historical patterns repeat.

Bitfinex analysts said Bitcoin is displaying several characteristics associated with the middle-to-late stages of a bear market. BTC is currently trading between the long-term holder realized price of $52,699 and the short-term holder realized price of $67,176.

A realized-price median around $63,200 has acted as support over the past two weeks. A sustained break beneath that level could expose Bitcoin to a retest of the June low near $57,803.

Wedson also noted that major liquidation events have historically occurred before Bitcoin establishes significant market bottoms. He cited the final large liquidation wave preceding the 2022 bottom as an example.

A Recovery Scenario Remains Possible

Despite the liquidation threat, Bitcoin’s chart still offers a bullish alternative.

BTC is trading around $64,000 and appears to be forming a potential inverse head-and-shoulders pattern on the daily chart. If confirmed, the setup could target a move toward $76,000.

Bitcoin has also remained above $62,000 despite several headwinds, including regulatory delays, higher bond yields and continued tensions between the U.S. and Iran.

Holding firm despite negative macroeconomic news could indicate that sellers are losing momentum. If BTC continues defending its key support levels, traders may begin viewing the resilience as an early sign of a broader bullish reversal.