Bitcoin, Markets

Bitcoin suffered a price crash earlier on Thursday, having missed record highs by a narrow margin earlier this week.

The top cryptocurrency by market value fell from over $19,300 to $16,327 during the early European trading hours and was last seen trading near $17,200, representing a 10% drop on a 24-hour basis, according to CoinDesk 20 data.

The sudden fall caught many traders off-guard, given the cryptocurrency was trading just 2% short of its record high of $19,783 on Wednesday.

So, what’s behind the $3,000 decline? Here are three of the primary factors responsible for the price drop:

1. Excess leverage

“Bitcoin has fallen victim to a large unwinding of leverage trades in derivatives listed across major exchanges,†Matthew Dibb, CEO of Stack Funds, told CoinDesk.

Nearly $2 billion-worth of derivative positions have been liquidated in the past 24 hours. Of that, more than $1.6 billion-worth has been closed in the past 12 hours, according to data source Bybit.

The unwinding of leverage trades had been expected, as the cost of holding long positions in the perpetual futures market, also known as the funding rate, had risen sharply to a multi-month high of 0.098% in the past few days – a sign of overleveraging, or overheating, in the market. The funding rate is decided and paid every eight hours.

Bitcoin, Markets
Bitcoin perpetuals funding rate
Source: Glassnode

With the price drop, the funding rate has fallen back to 0.011%, according to data source Glassnode. In effect, excess leverage has been crowded out.

2. Technical pullback

Bitcoin’s rally from $10,000 to $19,400 seen over the past seven weeks looked overstretched on the technical charts.

The momentum was so strong that the cryptocurrency consistently traded above its 10-day moving average (MA) throughout the ascent, despite an overbought reading on the 14-day relative strength index (RSI).

Bitcoin, Markets
Bitcoin daily chart
Source: TradingView

Assets seldom see a 90-degree rally, as speculators tend to book profits at regular intervals, pushing prices down to their short-term moving averages. The cryptocurrency has seen several pullbacks of 20% or more during the previous bull markets.

The price drop seen today has taken the cryptocurrency well below its 10-day average and allowed the RSI to realign in a more bull friendly-manner. “It’s a healthy pullback,†Stack Funds’ Dibb said.

According to chart analysts, price rallies with regular pullbacks are more sustainable than the near-90 degree ascents.

Some traders had positioned for the pullback by buying put options, or bearish bets, as noted by Deribit Insights.

3. Other factors amplified sell-off

According to trader and analyst Alex Kruger, Coinbase CEO Brian Armstrong’s tweet thread about the U.S. Treasury Department’s rumored plans to track owners of self-hosted cryptocurrency wallets weakened the bullish move, allowing a price pullback.

“This [regulatory concerns], against a backdrop of euphoria and unsustainable high leverage among longs led to the largest 24-hour drop since March,†Kruger told CoinDesk in a Telegram chat.

“However, if what Armstrong talked about comes to be, it would be extremely bearish. As of now, I see that as highly unlikely (in the short-term),†Kruger said.

The downward move may also have been amplified by prominent cryptocurrency exchange OKEX’s announcement it would resume withdrawals.

“Most of the frozen bitcoin [on OKEx) had traded up around 70%, so there were a lot of unrealized profits locked up there,†Sui Chung, CEO of CF Benchmarks, said in a statement provided to CoinDesk. “Once these coins were free to move, it’s likely many traders sold them for dollars and stablecoins to realize those gains, adding greater momentum to the selling.â€

Bitcoin had already fallen to around $17,600 when the exchange lifted the suspension at 08:00 UTC today, and fell to $16,350 in the following hour. OKEx suspended withdrawals on Oct. 16 when bitcoin traded near $11,500.

Still bullish

The path of least resistance for bitcoin remains on the higher side. “The latest price drop is a noise against the larger bullish trend,†Kruger said.

Indeed, bullish macro factors such as increased institutional participation, record money printing by central banks, and the search for yield remain intact despite the price drop.

Holding sentiment remains strong on Thursday, with the number of coins held on cryptocurrency exchanges at 2,384,913, the lowest level since Aug. 2018, according to data source Glassnode.

Bitcoin, Markets
Bitcoin exchange balance
Source: Glassnode

The data suggests investors view the current drop as a bull market pullback and remain confident about the cryptocurrency’s long-term prospects. The metric has declined by over 17% this year, meaning there’s been a liquidity drop in the market.

Lastly, today’s price plunge has cleared out the excessive leverage, as noted above. With the cost of holding long positions normalized, bitcoin can now chart a more sustained rally to record highs.

Crypto Broker’s Heusser expects the cryptocurrency to consolidate in the range of $17,500 to $19,000 in the short-term before resuming its uptrend.

“Bitcoin is yet to peak,†said Siddharth Menon, co-founder and COO of Mumbai-based WazirX exchange. “I’m also seeing a lot of pro traders take positions in bitcoin. These are healthy positions because they are not going all-in, but adding funds when it goes up or down.â€

Du lịch nhật bản, hướng dẫn du lịch Nhật và đánh giá địa điểm Nhật Bản Japan travel news, japan travel guides, japan holiday destinations and japan reviews

RELATED NEWS

Mystery Whale Returns by Moving $35 Million — Miner Transfers 1,000 ‘Sleeping Bitcoins’ from 2010

Two months after the mystery mining whale from 2010 transferred a string of 20 block rewards with 1,000 bitcoin on March 23, it seemed as though the entity was finished, after spending 10,000 bitcoin total. However, it took 78 days for the whale’s next move, as another 20 blocks from 2010 were transferred on Wednesday […]

Xem chi tiết: Mystery Whale Returns by Moving $35 Million — Miner Transfers 1,000 ‘Sleeping Bitcoins’ from 2010

Commodity Strategist Mike McGlone Says $40K BTC Target ‘More Likely’ Than $20K

Bloomberg Intelligence senior commodity strategist Mike McGlone believes bitcoin is “more likely†headed for $40K instead of $20K after discussing the possibility of capitulation in a recent tweet. McGlone’s opinion follows a number of predictions that say bitcoin could drop to the $20K zone if there’s more pullback in the cards. Bloomberg Commodity Strategist Suggests […]

Xem chi tiết: Commodity Strategist Mike McGlone Says $40K BTC Target ‘More Likely’ Than $20K

Crypto Payments App Bottlepay Is Now Available Across Europe

U.K.-based crypto payments provider Bottlepay has started offering services in other European countries. Users on the Old Continent will be able to send and receive even small amounts of euro and also buy, store and spend bitcoin with merchants accepting cryptocurrency. Bottlepay Promises Low-Cost Transactions in Euro and Bitcoin The Bottlepay app will allow Europeans […]

Xem chi tiết: Crypto Payments App Bottlepay Is Now Available Across Europe

Mike Novogratz: Bitcoin Investors Waiting for a New Narrative Shift

Mike Novogratz declared institutional investors are waiting for the next narrative shift in a recent interview at the Bitcoin 2021 conference in Miami. The CEO of Galaxy Digital thinks the market is now in a consolidation phase after the price crash last month. Novogratz also commented on what the rise of defi could mean for […]

Xem chi tiết: Mike Novogratz: Bitcoin Investors Waiting for a New Narrative Shift

NYAG Court Order to Shut Down Coinseed Succeeds, CEO Creates Profanity Token for Attorney General

The crypto trading platform Coinseed is shutting down operations according to a written statement from the company’s CEO Delgerdalai Davaasambuu. A court order secured by New York Attorney General Letitia James told Coinseed to halt all of its operations. Following the announcement of the shutdown, Coinseed’s CEO said he created an ERC20 token called “FLJ†[…]

Xem chi tiết: NYAG Court Order to Shut Down Coinseed Succeeds, CEO Creates Profanity Token for Attorney General

Grand Theft Auto 6 to Feature a Fictional Cryptocurrency

One of the biggest franchises in the videogame industry, Grand Theft Auto, will feature in-game payments of “bitcoin†or another fictional cryptocurrency. Contractors will pay the player with this currency when they need to make anonymous, untraceable payments. This would constitute another push for Bitcoin awareness into mainstream media culture. Grand Theft Auto 6 to […]

Xem chi tiết: Grand Theft Auto 6 to Feature a Fictional Cryptocurrency

Bitcoin Keys Cannot be Hacked: Skeptics Question the Official Colonial Pipeline Bitcoin Seizure Story

On June 7, the United States Justice Department and the Federal Bureau of Investigation (FBI) announced the “recovery†of 63.70 bitcoin from the funds Colonial Pipeline sent to the hackers. The official story has a number of inconsistencies and federal investigators did not disclose how the FBI was able to confiscate the Darkside gang’s private […]

Xem chi tiết: Bitcoin Keys Cannot be Hacked: Skeptics Question the Official Colonial Pipeline Bitcoin Seizure Story

Alternative 401(k) Product Offers In-Plan Cryptocurrency Investment via Coinbase Institutional

On Monday, the San Francisco-based retirement plan provider for small to medium-sized businesses, Forusall, announced the launch of an alternative 401(k) plan that offers in-plan cryptocurrency access. According to the alt 401(k) investment option, Forusall is working with Coinbase Institutional as its retirement plan partner. Forusall and Coinbase’s Institutional Arm Offer Crypto-Infused Alt 401(k) Plan […]

Xem chi tiết: Alternative 401(k) Product Offers In-Plan Cryptocurrency Investment via Coinbase Institutional

El Salvador Offers No Capital Gains Tax, Permanent Residence to Crypto Entrepreneurs

White House Tech Advisor Tim Wu Keeps at Least $1 Million in Bitcoin

White House Tech Advisor Tim Wu Keeps at Least $1 Million in Bitcoin

Alternative 401(k) Product Offers In-Plan Cryptocurrency Investment via Coinbase Institutional

Scammers Pick Bank Transfers Over Cryptocurrency, Australian Report Reveals

As Crypto Interest Winds Down Bitcoin’s Daily Transaction Rate Plummets to Two-Year Lows

FBI Agent Recovers Private Key to $2.3M in Bitcoin Paid to Colonial Pipeline Hackers

El Salvador Offers No Capital Gains Tax, Permanent Residence to Crypto Entrepreneurs