Bitcoin bulls could walk into a $1 billion liquidation trap as Bank of America warns multiples are about to compress

Bank of America warns Bitcoin bulls of a potential $1 billion liquidation trap as valuation multiples are expected to compress, prompting a strategy rethink for investors.

Could Bitcoin’s rapid rise lead to a sudden fall? With predictions of massive liquidations in the air, you might want to rethink your strategy if you’re holding Bitcoin. Recent warnings from Bank of America suggest that crypto bulls could soon find themselves caught in a $1 billion liquidation trap. What Did Bank of America Say? According to Bank of America’s latest market insights, the current valuation multiples on Bitcoin and other cryptocurrencies are due for a substantial compression. This suggests that what seems bullish today could quickly turn into a bearish scenario if price corrections occur. Their analysts point to the widespread market sentiment that may not sustain much longer. “Historically, we’ve seen that market highs often precede sharp corrections, and it’s no different for cryptocurrencies,” stated Michael Miller, an equity analyst at Bank of America. “Investors should be cautious.” What Are the Implications for Bitcoin Traders? Data from Glassnode shows that as of February 2026, the number of BTC addresses in profit is nearing 85%, a clear indicator that many traders are in a positive position. However, if the market begins to correct, these addresses may flood the market with sell orders, triggering a cascade of liquidations. Wallets holding more than 1 BTC have also seen a significant increase, growing by almost **15%** in the past month alone. While this may appear bullish, it could mean that larger holders are preparing to take profits at any sign of a downturn. How Close Are We to Liquidations? On-chain metrics from CryptoQuant indicate that the total open interest in Bitcoin futures has skyrocketed to around **$3.5 billion**. Many experts, including on-chain analyst Marcus Wei, believe that if the price dips below the critical support level of **$30,000**, we could see a significant spike in liquidations. “A breach of the $30,000 support could lead to a $1 billion liquidation event,” warns Marcus Wei. “Traders need to be prepared for volati