Bitcoin's price has dropped by over 4% in an hour - since quotation of $ 9.224 to $ 8.851 - after 52 hours of battery life with low volatility and volume. The sudden drop led to a loss of $ 19,25 million on BitMEX and $ 1,5 million on Bitfinex according to statistics from Datamish.com, causing significant compression in a short period of time.
What triggered the sudden drop in Bitcoin prices?
Typically, after several days of low volatility, the price of Bitcoin tends to make a big leap in a narrow interval of time. Bitcoin recently saw a steady rise in its low volume price.
An upward trend with a declining volume usually suggests that the probability of it being a false signal before a big downward move is high. The significant amount of long contracts placed on major trading platforms including BitMEX, Binance and Bitfinex and the low volume on the cryptocurrency market have probably made Bitcoin vulnerable to a pullback.
Market data shows that several Bitcoin whales sold tens of millions of dollars of BTC at a price of $ 9.200, causing a strong reaction from long-term contract holders and buyers. In markets with high leverage such as Bitcoin, a relatively small market sale compared to the daily volume of the business, can cause a great response from both buyers and sellers.
The Bitcoin market shows tens of billions of dollars in daily volume on paper, but since most of it is leveraged volume on BitMEX, Binance Futures and OKEx, the actual volume is substantially lower. Low volumes before a highly anticipated event like the halving of May this year create an ideal environment for extreme volatility.
Extreme volatility can be expected before halving
As stated by cryptocurrency trader Jacob Canfield, historical data show that halving the block reward does not anticipate an immediate hike. In the previous two, in fact, the Bitcoin price fell immediately after halving, without showing a strong recovery until several months after halving.
Canfield noted, “If you're thinking that Bitcoin will grow non-stop because of halving, let history be your guide. Get ready for anything. " Yesterday, CryptoSlate also reported that a well-known multibillion-dollar scam has started moving its $ 117 million equivalent funds back into Bitcoin.
Analysts remain uncertain that the distribution of funds would lead to an immediate sell-off, but they favor the theory that a sell-off would be quickly followed by a new redistribution. If so, it could add additional pressure to the sale on the market.