3 Main Reasons Bitcoin’s Price Plummeted 14% In 15 Minutes To $8,600
The price of Bitcoin dropped 14% to $8,600 in less than 15 minutes in an intense long squeeze. 3 Main Reasons Bitcoin’s Price Plummeted 14% In 15 Minutes To $8,600
The price of Bitcoin (BTC) plummeted by 14% from $10,180 to $8,600 on BitMEX within less than 15 minutes.
Three major factors that caused the price drop were: long contracts accounting for the overwhelming majority of the Bitcoin market, BTC reacting to a multiyear resistance at $10,500 and whales dumping.
Bitcoin Was Overdue For A Long Squeeze
Before the price correction occurred, the funding rate for Bitcoin and Ether (ETH) hovered at around 0.16% and 0.19%, respectively.
The term funding rate in the Bitcoin futures market means the fee long contract or short contract holders have to pay their counterparts to establish balance in the market.
As an example, let’s say the price of Bitcoin is going up and the funding rate, which typically is at around 0.01%, rises to 0.16%. If a trader is holding a $100,000 long position, the trader has to pay $160 every eight hours to another short contract holder holding a $100,000 short position.
The funding mechanism prevents the market from swaying to majority longs or shorts for an extended period of time.
A signal something was amiss was the fact that prior to the price drop, Bitcoin’s funding rate was too high and around 75% of the market was holding long contracts.
The majority of traders were anticipating Bitcoin’s price to increase and were aggressively longing the market. Inevitably, a long squeeze occurred, liquidating about $120 million worth of long contracts.
The price of BTC also fell exactly as the United States market opened. It suggests the CME Bitcoin futures market was partially behind the sell-off in BTC.
Cryptocurrency Investor PlanB Said:
“BTC crashes -$1000 in 15 minutes on US opening (exact same time and volumes as of May 20 and May 21.”
BTC Rejects At A Multiyear Resistance
Bitcoin has tested the $10,500 resistance level a total of three times in the past eight months.
The top-ranked cryptocurrency on CoinMarketCap rose to as high as $10,500 in October 2019. Within four weeks, it dropped to $6,400, bottoming out in a six-week span.
In February, Bitcoin made another attempt to surpass the $10,500 resistance level. After rejecting violently to $8,400, BTC fell to as low as $3,600 in the following four weeks.
This is the third time BTC has tested the same level in the last three quarters, and it is also the third time it has been met with a similar reaction.
As BTC fails to reclaim the same level for three consecutive times, the question traders are asking is if BTC is ready to break out of it and initiate a proper bull trend in the coming weeks.
Given the intensity of the drop and the breakdown of the short-term market structure, the probability of seeing Bitcoin testing higher resistance levels in the near term found at $11,500, $12,400 and $14,000 decreased with the recent price action.
Whales Moved Their Funds
A few hours before the drop happened, whales moved their funds to BitMEX and Binance.
CryptoQuant CEO Ki Young Ju Said:
“Multiple significant BTC inflows from Binance and BitMEX a few hours before the dip.”
The combination of whales selling Bitcoin right at a multiyear resistance with high funding and the majority of the market being long triggered a strong long squeeze within a short period of time.
Capitulation by Unknown Miner ‘Caused the Dip,’ Says CryptoQuant CEO
The CEO of CryptoQuant believes that capitulation by an unknown miner caused the latest Bitcoin price dip.
According to Ki Young Ju, CEO of CryptoQuant, capitulation by an unknown mining pool was responsible for the latest market dip.
The miner who has produced 51 blocks over the past four days may be capitulating, reports Ki Young Ju. The 51 blocks produced by the mining pool came with a reward of 637.5 BTC, 9% of the total over that time period.
This Miner Sells Only When Price Is High
Meanwhile, since May 20th (but not including today) the largest unknown mining pool — it has the fifth biggest hashrate — has moved 12,571 BTC out of its treasury. As Ki Young Ju explained to Cointelegraph:
They [mining pools] don’t move Bitcoins unless they decide to sell it. Each miner has a different wallet management system. Major mining pools send BTC to exchanges periodically, and the largest unknown mining pool, they only move their Bitcoins when the BTC price reaches the top.”
Today, the same mining pool has moved several thousand BTC. However, it may be that this miner is not capitulating, but just took the opportunity to liquidate its inventory at a price that it found attractive. As with all Bitcoin price movements, it’s not entirely clear what is behind it and whether this miner caused the dip. But it comes on top of the reports that show that miners are currently selling more Bitcoin (BTC) than they are generating.
Inefficient Miners Are Hurting
Obviously, since the halving, block reward has been cut in half; however, the actual production has suffered even a greater setback due to the falling hashrate rate and an increase in the block time interval.
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