‘Who was selling? Not HODLers’ — New data hints at Bitcoin crash ‘culprit’ amid leverage wipe-out
Bitcoin (BTC) crashed by $9,000 in hours on Tuesday thanks to a mass unwinding of leveraged traders and borrowers, one analyst believes.
In a series of tweets on Wednesday, Willy Woo sought to get to the bottom of what made BTC/USD dive to lows of $42,800 on Tuesday.
Woo: Bitcoin margin borrowers and open interest may be to blame
With rumors flying over who was behind Bitcoin’s major price dip, analysts have been crunching data in order to understand where the rout began.
Analogies to the March 2020 crash, sparked by coronavirus measures, abound, but Tuesday’s event showed major differences, Woo said.
“Leverage markets sold off but investor buying just got stronger,” he summarized.
“BTC flash crashes are caused by deleveraging, the COVID crash was similar in that derivatives overreacted, but back then it was supported by investors. This one was completely divergent and a mystery. Cheap coins.”
Woo subsequently suspected that the dip came as a result of margin borrowing and open interest. In a classic domino effect, positions unwound to produce a “cascade” of liquidations and a positive feedback loop, which severely impacted spot price.
Typo. Open Interest was NOT crazy high, it was within normal bounds.— Willy Woo (@woonomic) September 8, 2021
While the processes involved may be complicated for the average observer, the strength of Bitcoin’s rebound and ongoing investor buy-ins suggest that cold feet among hodlers were not involved in the event.
Related: Bitcoin’s sharp fall from $50K linked to stronger US dollar, gold correlation shows
According to on-chain monitoring resource Whalemap, large-volume investors who were newcomers to the market provided the vast majority of sell-side pressure.
“So yesterday we had a sell off. The move was quite violent and large volumes of Bitcoin were being sold off on spot markets, researchers tweeted alongside a chart showing where those parties had acquired BTC.
“But who was selling? Not HODLers. Mostly whales and in fact the ones that bought their btc only quite recently.”
Bitcoin whale outflows annotated chart. Source: Whalemap/Twitter
For fellow analyst William Clemente, meanwhile, Tuesday provided a welcome reset of frothy derivatives markets.
“Investor activity strengthening + Leveraged speculators wiped = healthy cleansing,” he concluded alongside Woo’s findings.
Trader Who Called Last Bitcoin Crash Issues New Warning As BTC Hovers at ‘Make or Break Level’
The trader who accurately called Bitcoin’s top just under $65,000 has issued another warning to BTC bulls as the world’s biggest crypto hovers around $50,000.
The pseudonymous trader known as Dave the Wave tells his 74,000 followers that Bitcoin is at a “make or break” point as it trades at a critical level where multiple technical resistances align.
“It doesn’t get much better than this – make it or break it time.”
Source: Dave the Wave/Twitter
The analyst’s chart shows BTC sitting at the very top of a rising wedge within a large descending channel, slowly rounding off and threatening to drop below $30,000 over the coming months. Dave the Wave says that to invalidate this thesis, Bitcoin would have to break through one critical resistance level.
“Price convincingly north of $51,000 – invalidated
Price down to the $46,000 area, further validated.”
The trader makes an observation regarding Bitcoin’s interaction with the Gaussian Channels, an indicator typically used to show long-term deviations from price. According to the crypto strategist, BTC already hitting the channels several weeks ago is a sign that it will continue to drop lower.
“Price has never come back to the Gaussian Channel [on the weekly] without then going on to go deep into that channel. Syncs with the LGC (logarithmic growth channel) nicely, and shows a picture of reducing macro volatility.”
Source: Dave the Wave/Twitter
Bitcoin Crashing To $20k Still Very Likely – Chief Market Strategist Avers
Bitcoin is still trending in dangerous waters that could see its price slump into a deeper correction, an expert market analyst has now warned.
Speaking to a media outlet, Kitco News on Friday, Gareth Soloway, the chief market strategist of InTheMoneyStocks.com projected that the asset’s rapid surge in price was most likely a bear trap, which normally occurs when FOMO kicks in after an initial bullish minor correction prompting a majority of retail position to be opened long before the market sees a deeper correction as initial buyers liquidate their long positions.
“One of the things that I have talked about is that Bitcoin will eventually get to the $18k-$20k mark. there is really no question in my mind” he said.
2013 And 2017 Depict Similar Patterns
He particularly pointed out moves witnessed during the 2013 and 2017 corrections which exhibited similar patterns stating that the assets price was likely going to correct deeper if Bitcoin adopted the same patterns.
In 2013 Bitcoin sprung from $100 to $1,300 before recoiling to $450, a move that was later followed by price snapping back by about 78% to $1,100.
In an almost analogous unfolding, price printed a similar chart in 2017 after a spirited 300% surge towards $20,000 before pulling back to $11,000. Price then made a 72% correction attempt to $17,000 before dumping to $5,000 and later to $3000 in the following weeks.
Current situation not any different
The markets pundit asserted that Bitcoin squarely sits in the same phases in the current situation and warned of a deeper correction.
“Bitcoin was at $65,000, it corrected to $30,000 could it go back to 50k-52k and then go lower? So you see what I’m saying here which is that; this is actually following the actual replica of the two previous mega moves from 2013 and 2017 and there is really nothing that is telling me that this is any different”
He called out the likeliness of price turning around below head and shoulder neckline he had plotted during May’s drop.
BTCUSD Chart By TradingView
He however noted that if price happened to take out the $65,000 ATH, he would be convinced otherwise.
Gareth is not the only one who sees an incoming deeper correction. On Wednesday, Charles Edwards, the founder of Capriole Investment noted a repetitive pattern that could throw Bitcoin into an almost similar situation as witnessed in 2013. Referring to data collected on Checkonchain.com, the crypto investment manager argued for a case of Bitcoin gearing towards a “double bubble” which meant that in the current attempt to reclaim its highs of $65k, Bitcoin printed two almost similar tops then slid into a deeper correction.
Earlier in the month, Richard Heart, the founder at HEX also echoed the same sentiments predicting that Bitcoin would have to complete an 85% correction to bottom at $10,000 despite the asset having shed over 50% of its accumulated value during the May pullback stating that “that is normally what it does” .
Bitcoin Crashes Below $30,000, Bear Market Or Bullish Setup?
Bitcoin has finally crashed below $30,000 for the first time in a month after the digital asset had recovered above this point following the crash to the $28,000 range in the last month. Market volatility levels have continued to remain low while the digital asset price continues to suffer. Market sentiments seem to remain in the extreme fear range as investors hold off putting more money into digital assets.
Bitcoin continues to show bearish tendencies as, despite best efforts, bulls have not been able to drag the coin out of its three-month-long decline. Breaking the critical $30,000 hold that holders have tried to keep the digital asset price. Market indicators so far continue to show that the digital asset might be headed for further decline.
Related Reading | Retail Traders Pile On Shorts, Is This The Bitcoin Bottom?
The price of the digital asset has now hit the same price that the coin was at the beginning of the year 2021. Showing that this dip might be continuing on further down than the market anticipates.
Bitcoin Market Dominance Continues To Decline
Bitcoin is the first cryptocurrency and certainly the most valuable has always maintained market dominance over the other crypto assets in the market. The market dominance was well above 50% at the beginning of the year but now that number has declined to less than 50% market dominance for the coin.
Bitcoin market dominance at 42% | Source: BTC Dominance Index Chart from TradingView.com
The price crash in May saw the market dominance for the digital asset take a sharp decline as other crypto-assets started to step up their game and take more market share. With coins like Ethereum slowly but surely taking a much larger market share.
Related Reading | Bitcoin Might Already Be In A Bear Market, Investors Just Don’t Know It Yet
Bitcoin dominance saw sharp declines in 2017 when other crypto assets started gaining notoriety. In 2017 alone, the digital asset saw its market dominance go down from 95% to 52%, before recovering up to 70% as the last bear market raged on. But now, bitcoin has started losing much of that dominance, currently sitting at 46% market dominance.
Bear Market More Likely Than Bullish Setup
Massive FUDs in the market might point more to a bearish trend than it does to the bullish setup. There have been debates about whether events like the China crackdown on mining and crypto bans have been a good indicator for the crypto market at large and consensus seems to be that the events will help to make digital assets even more valuable.
While things like this might be true in the long term, it seems so far to not be good for the long term. With the FUDs have come decreasing prices in the market and the charts continue to be in the red.
Bitcoin price crashes below $30,000 | Source: BTCUSD on TradingView.com
With investors still being wary of putting money in the market, the price has so far suffered. Despite institutions like Michael Saylor’s MicroStrategy continuing to be bullish on bitcoin.
Bitcoin is currently trading at $29,764, with an overall market cap of approximately $557 billion.
Featured image from Investment U, charts from TradingView.com
Bitcoin crashes below $30K, but on-chain data suggests accumulation is brewing
Despite Bitcoin crashing below $30,000 for the first time in one month, on-chain metrics suggest whales may be steadily accumulating BTC.
According to Glassnode’s July 19 “The Week On-Chain” report, the Bitcoin reserves of centralized exchanges have continued to evaporate despite the recently sustained bearish momentum, with an average of 36,000 Bitcoin (worth roughly $1 billion) being withdrawn from exchanges monthly.
Glassnode infers the shrinking Bitcoin reserves on exchanges as indicating large investors moving BTC into secure storage, rather than leaving their coins on exchanges in preparation for selling.
Bitcoin net position change on exchanges: Glassnode
Glassnode also identified a recent increase in the number of entities hodling Bitcoin since May, increasing from roughly 250,000 to nearly 300,000 today. Glassnode describes “an entity” as a unique on-chain cluster of associated addresses.
The on-chain analytics provider noted that the number of “sending entities” — unique address clusters associated with selling — has fallen by roughly one-third from 150,000 to 100,000, while “receiving entities” — addresses linked to accumulation or holding — have increased by roughly than 20% from 190,000 to 250,000 over the same period.
Bitcoin changes in on-chain entities: Glassnode
Despite emphasizing signals suggesting accumulation, Glassnode noted heavily divided market sentiment, predicting extreme volatility may be imminent for the markets:
“We have an extremely divided market, and one with a likely expansion of volatility just around the corner.”
Related:Traders are withdrawing 2,000 BTC from centralized exchanges daily
It added that miners are now also in accumulation mode despite expenses incurred in the great migration in the wake of China’s mining crackdown. The miner net position change metric indicates that more than 3,300 BTC per month is currently being accumulated.
Bitcoin Crash Below $30,000 Expected by Peter Brandt as He Launches Twitter Poll to Estimate Chances
Savvy trader Peter Brandt has launched a poll to ask users how low Bitcoin can go below $30,000 as he seems to expect this drop to take place.
Prominent Bitcoin opponent Peter Schiff has published a similar tweet but he expects the flagship crypto to crash below the $10,000 mark.
“When BTC crashes through $30,000, how low will it go?”
Old-school commodity trader Peter Brandt has taken to Twitter to kick off a poll about the possible fall of Bitcoin below the $30,000 level soon.
Among the options provided by Brandt in it, there is Bitcoin hitting $25,000, dropping to $20,000 and even well below this level. However, he has also left an option for those who reckon that the king cryptocurrency will remain above $30,000 after all.
By now, the poll has been collecting votes for four hours, and so far 31 percent have voted that Bitcoin will not break below $30,000. 25.3 percent believe it will collapse below $20,000.
24.6 percent think, the flagship cryptocurrency will be hanging in the $25,000-$20,000 range and 19.1 percent have voted for the #$25,000-$30,000” range.
In the comment thread, Peter Brandt shared a Bitcoin chart with a pattern on it that shows why he expects Bitcoin may drop below $30,000 soon.
For reference pic.twitter.com/2jCT7LLIVF
— Peter Brandt (@PeterLBrandt) July 8, 2021
Peter Schiff “votes” for Bitcoin hitting $10,000
Vocal Bitcoin hater, CEO of Euro Pacific Capital Peter Schiff has offered a similar scenario to Brandt’s. The difference is that the gold bug Schiff believes Bitcoin is going to crash well below the $10,000 price mark.
He believes this is going to happen due to Bitcoin drawing a head and shoulders pattern now, which usually indicates a reverse in the asset price. Another reason, as per him, is that leveraged traders may be forced to start panic selling if BTC does plunge to $10,000 after all.
The $20,000 level will be a powerful overhead resistance, according to a Schiff’s comment in the thread.
Bitcoin continues to carve out the right shoulder of an ominous head and shoulders top pattern. If #Bitcoin takes out the June low, the market could easily collapse below $10K, especially if leveraged speculators are forced to sell. No one seems to acknowledge this possibility.
— Peter Schiff (@PeterSchiff) July 7, 2021
BTC Netflows index remains negative
CryptoQuant analytics agency has tweeted that since June 15, the Bitcoin Netflow (30-day MA) has remained negative.
This means that Bitcoin is being withdrawn from crypto exchanges into cold storage vaults by both institutional and retail investors.
Usually, this situation leads to an asset’s price increasing, the CryptoQuant team commented.
Skittish Investors Wipe Out All 2021 Gains, Sending Bitcoin Crashing to a New Low & Ether Back at $1,700
The cryptocurrency market is experiencing another brutal day. The price of Bitcoin went down as low as $28,830 on Coinbase, as of writing, lower than the May 19 low of $30k on the exchange, a level last seen in early January. On other cryptocurrency exchanges, prices went even lower. Today’s sell-off has put in a new low for 2021 and wiped all the gains made by bitcoin this year. “There’s just a lot of fear, and when there’s fear, people sell risky assets. I do think that Bitcoin’s still perceived as a risk-on asset,” Meltem Demirors of CoinShares, said in an interview on Bloomberg. “Generally, investors are skittish.”
Ether’s price went down to $1,700 on Coinbase, below the May low of $1,725, last seen in March this year only. The total cryptocurrency market cap has stumbled to $1.2 trillion, last seen in early February. After yesterday’s $1 billion liquidations, another 238,232 traders were liquidated for almost $1 billion and growing in the past 24 hours. These numbers, however, are not correct because Binance API only publishes 1 liquidation per second. According to Antoni Trenchev, co-founder of crypto lender Nexo in London, breaking $30k means “we should revisit $25,000 and even $20,000 before the next leg up.” Pankaj Balani, chief executive officer of digital asset derivatives exchange Delta Exchange, is of a similar opinion who told Bloomberg that a conclusive break below $30,000 would mean a “massive hit” to sentiment and possibly “heavy selling activity” across the crypto market. However, he expects bitcoin to rebound and challenge $40,000 in the coming weeks. https://twitter.com/RaoulGMI/status/1407100487690752000 “Negative trading conditions in the market are coming from an overly long position built up in the strong first-quarter runup that has not cleared itself out yet,” said Adam Reynolds, CEO at Saxo Capital Markets. With this latest sell-off, Bitcoin’s correlation with the S&P 500 had broken and now fallen to zero after reaching an all-time high when coronavirus struck. Stocks are progressing towards their all-time highs after recovering sharply from their last Friday lows following the Federal Reserve’s shift in policy. JPMorgan strategists said in a note,
“Last week’s FOMC meeting was a hawkish surprise but does not change our market outlook. The reflation trade experienced a sharp, technically driven pullback, but we expect the trade to resume and see this move as an opportunity to add exposure to cyclical equities and commodities.”
https://twitter.com/MatiGreenspan/status/1407302990315282433 For Bitcoin, it’s more than just the Fed and rising dollar at play here; the industry-specific factors, especially China cracking down on the cryptocurrency market, are impacting the prices. As we reported, China’s latest measures came from the nation’s central bank, which summoned officials from banks and payment institutions like AliPay to reiterate a ban on crypto services. Although this is nothing different from the past and has already been in effect, the fact that it comes straight from the top makes it hit harder. Seth Melamed of Tokyo crypto exchange Liquid said,
“Some of the miners in China may be more willing to sell their bitcoin now versus when they are able to run their mining operations, because they have to raise cash.”
https://twitter.com/AltcoinPsycho/status/1407069745564684288 At the Qatar Economic Forum on Tuesday, founder and chief executive officer of Galaxy Digital, Michael Novogratz, argued for Bitcoin as a dependable store of value. He said,
“If you’re going to be long gold, Bitcoin is a better version because it’s got the same macro tailwinds, but it is also very early in the adoption curve.”
https://twitter.com/mcuban/status/1407044302908362759 Billionaire investor Mark Cuban also argued along the same lines as he said while not a “hedge,” bitcoin is similar to gold because both the assets are driven “exclusively by supply and demand.” It’s just that “BTC does a better job with both,” while gold “is useless, pretty much across the board, but particularly as a hedge,” he added.
Bitcoin Crashes Below $30K For The First Time Since January 2021
Things in the cryptocurrency market are looking increasingly bad as the price for bitcoin just crashed below $30,000.
- Bitcoin’s price is currently trading below $30,000.
- This hasn’t happened in months as the last time we saw these levels was in January 2021.
- Other cryptocurrencies are also following suit with most of the altcoins charting double-digit declines on the weekly.
- This has also led to almost $800 million worth of liquidated positions across the major exchanges over the past 24 hours.
- The largest single liquidation order happened on Bybit. It was a Bitcoin position with a face value of $5.4 million.
- Not surprisingly, the majority of liquidations came from long positions. In the past hour alone, around 94% of the longs were wiped off.
Bitcoin Crash Slows Institutional Demand
More than a week after the bitcoin price crash of May 19, institutional investors have demonstrated a weak appetite when it comes to buying the dip, according to analysts at JPMorgan.
“Bitcoin funds continue to see outflows and gold exchange-traded funds continue to see inflows, suggesting that the shift away from bitcoin and back into traditional gold by institutional investors is still underway,” according to the report by JPMorgan analyst Nikolaos Panigirtzoglou.
May marked a 35% drop in price for bitcoin, making it one of the worst months to date for the cryptocurrency.
“There is little doubt that the boom and bust dynamics of the past weeks represent a setback to the institutional adoption of crypto markets and in particular of bitcoin and Ethereum,” according to the report.
The analyst sees medium-term fair value for bitcoin in the $24,000 to $36,000 range.
“We had argued previously that the failure of bitcoin to break above the $60K threshold would see momentum signals turn more bearish and induce further position unwinds, and that this has likely been a significant factor in the correction last week” in pushing commodity trading advisors and other momentum-based investors to cut positions, the bank said.
Read more: Bitcoin’s Long-Term Put Options See Sustained Demand as Price Consolidates
On the Chicago Mercantile Exchange, there’s a similar picture of little appetite to buy the dip, according to the analyst.
At press time, bitcoin was trading at $36,221, representing a nearly 1.5% drop over the last 24 hours. The cryptocurrency is up by 24% so far in 2021.
The cryptocurrency could continue to fall in the short-term, the analysts wrote.
“While there are tentative signs of stabilization in bitcoin and Ethereum prices following the correction in recent weeks, the positioning backdrop is not yet at levels that could be characterized as ‘oversold,’ leaving them vulnerable to further position unwinds,” according to the report.
Read more: Bitcoin, Ether Etch Largest Daily Gains in a Week
4 Signals That the Bitcoin Crash Might Soon Reach a Local Bottom
A bullish case isn’t on many people’s minds – but signs are cropping up that Bitcoin may indeed be headed for a trend reversal. Here are some signs explaining why BTC might be overdue for a renewed uptick.
Bitcoin reached its all-time high of almost $65K on April 14, 2021, a little over a month ago. However, over the past 10 days the price violently broke down from the $50K mark and even reached $30K last Wednesday.
The bearish sentiment affected the whole crypto market, as altcoins suffered even more: ETH, which saw its all-time high of $4400 just 11 days ago, dropped earlier today below $1800, before a slight correction as of writing these lines.
Where is the bottom for this ongoing crypto bloodbath? No one knows, but it might be worth keeping an eye on the following optimistic signals.
Crypto Fear & Greed Index: Remember April 2020?
The crypto fear & greed index is now at levels not seen since April 2020, which is about the time when the last crypto market crash occurred, taking BTC down below $4,000, losing over 50% in two days at the peak of the pandemic “Black Thursday.”
In hindsight, it was an amazing time to buy in, but it wasn’t necessarily obvious back then. These days, Bitcoin has fallen over 50% from its ~$65,000 high down to $30,000 on Wednesday – is the index right once again, and is this crash a blessing in disguise for people with stablecoins on the sidelines?
here are some times in the last 2 years fear and greed was sub 15.
make of it what you will. pic.twitter.com/TlLe7B7Q5C
— Bluntz (@SmartContracter) May 23, 2021
S2F Model: Lower Band At $30K
Similarly, the stock to flow (S2F) model indicates that BTC is due for an upwards rebound at the $30,000 mark given its stage in the cycle. The S2F model treats Bitcoin as a commodity (given that it has a fixed supply and limited issuance, similar to gold) and thus factors in circulating supply and production speed in order to determine scarcity and therefore price.
IN BITCOIN’S SHORT HISTORY, the S2F model and 4-year cycle have been proven to be reliable. As been stated by PlanB, the creator of the mode: “The continuation of this crash into the next few weeks (effectively the end of the bull cycle) would invalidate the S2F model and 4-year cycle model,” which have so far been sound – many analysts predict that it’s not yet time for things to turn around for the worse.
S2F currently plots the lower band at $30K, which is this week’s current low.
On-Exchange Stablecoins At ATH, Waiting Aside?
The amount of stablecoins on exchanges is at a yearly ATH – Lex Moskovski opines that there are ‘a lot of bullets waiting to be deployed from the sidelines.’
Of course, this could merely be a function of a large number of new entrants into the cryptocurrency ecosystem, but it most likely means big players are gearing up to bring in large buys.
In addition, John Bollinger, the creator of the Bollinger Bands indicator, believes that BTC might be nearing a local double bottom.
All of these indicators come together and paint a better picture of Bitcoin’s immediate short-term potential than the market is making it out to seem. After the past few days’ waves of incessant bearish moves, it may be time for BTC to take a breather, as RSI indicates that we are heavily oversold.
Vaporware Altcoins Bleeding Out – BTC Dominance Rising
It’s clear that altcoins have more to worry about – Bitcoin dominance has hit a local bottom at ~40% and has been steadily trending upwards (currently sitting at 47%). It’ll most likely recover even more as the market sheds off the excess weight that had been added on by vaporware coins fuelled by the speculative altcoin mania bubble.
Those dogecoin copycats can be easily referred to as “dumb money” and “weak hands.” Once those hands are gone – the smarter money will return to the large-caps cryptocurrencies and, most likely, to the king of them, which is Bitcoin.