Bitcoin price fell from above $30,000 to a new local low of $29,032 this morning. The initial 3.5% price drop happened in just 20 minutes.
While the sell-off does not appear to have any fundamental reason, two factors come to the fore today for the sudden drop in price. These are a massive sale of 16,000 Bitcoins (BTC) worth about $467 million on Binance and the subsequent flurry of liquidations.
The reasons for the fall of Bitcoin
Analyst @52Skew shared what was likely the initial trigger for Bitcoin’s sudden price drop via Twitter. The trader revealed that 16,000 Bitcoins were sold from the Binance spot at the market price, while “fairly typical” amounts were sold on other spot exchanges. “Interesting sell-off here,” the analyst noted, referring to potential whale activity.
He also noted that there were some pre-selloff signals, with big selling spot & market makers selling off the price. He further speculates:
“Be a new local low here if $29K holds & doesn’t fall later FUD. However, 16K BTC is an unusual size to be sold in the market exclusively by the Binance spot. Usually this kind of selling happens before bad news comes out. If an event that is nothing burger- could see an omega short squeeze”.
Indicators investors should watch for, according to @52Skew, are negative funding “across the spectrum,” open interest, which indicates heavy interest in shorts, and increased spot buying volume.
After the massive sell-off, there was a so-called long squeeze in the futures market. According to Coinglass data, more than $181 million worth of Bitcoin futures contracts were liquidated. This marks the highest amount of long liquidations since March 9 and March 23 this year.
On March 9, Bitcoin fell from above $21,700 to below $20,000 as a result of the long squeeze ($248.8 million), but BTC recovered above $22,000 in just two days. On March 23, as a result of the long squeeze ($183.7 million), Bitcoin fell from $28,300 to just below $27,000, and the market took only one day to recover all of the losses.
Analyst @DaanCrypto states that this dumping was necessary, to flush out all the over-leveraged long positions in BTC, ETH and other altcoins. “Funding rates seem to have already been mostly reset,” the analyst concludes.
Michaël van de Poppe, founder of Eight Global, agrees. “It’s just a cascade of liquidations,” writes the analyst, who further advises:
“Should you get into #altcoins and positions? Well, this reduction is your chance. Bitcoin fixes, the cascade of liquidity received in altcoins and deep wicks provide significant opportunities. Nothing major has changed, just a correction.”
At press time, Bitcoin price was trading at a key support level, changing hands at $29,166.