Why Is Bitcoin Down Today? Binance Whale Games and more
Bitcoin price fell from over $30,000 to a new local low of $29,032 in the early morning hours (4:00 am EST) today. The first price drop of 3.5% happened in just 20 minutes.
Although the sell-off does not appear to have a fundamental cause, two factors are in focus for the sudden price drop. This is a massive sale of 16,000 BTC worth around $467 million on Binance and the subsequent cascade of liquidations.
The Reasons for the Bitcoin Plunge
Analyst @52Skew shared what is believed to be the initial trigger for the sudden drop in Bitcoin price via Twitter. The trader revealed that 16,000 Bitcoin were sold from Binance spot at market price, while “fairly typical” amounts were sold on other spot exchanges. “Interesting selling here,” the analyst said, referring to possible activity from whales.
He further noted that there were some signals ahead of the sale, with major spot and market makers selling off the price. He further speculates:
Either a new local low here if $29K is held and no FUD is dropped later. However, 16K BTC is unusual size to be sold exclusively from Binance spot. Usually this type of selling happens before bad news comes out. If a nothing burger event; could see an omega short squeeze.
Indicators investors should look for, according to @52Skew, are negative funding “across the board”, open interest, which indicates heavy interest in shorts, and elevated spot buying volume.
After the enormous sale, a so-called long squeeze arose on the futures market. More than $181 million in Bitcoin futures were liquidated, according to Coinglass data. This is the highest number of long liquidations since March 9 and March 23 this year.
On March 9, Bitcoin fell from over $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 under $27,000, and it took the market only one day to recoup the entire loss.
Analyst @DaanCrypto states that this dump was necessary to flush out all overleveraged long positions in BTC, ETH and other altcoins. “Funding rates seem largely reset already,” the analyst concludes.
Michaël van de Poppe, founder of Eight Global, agrees. “It’s just a liquidation cascade,” writes the analyst, who further advises:
‘Should you get into #altcoins and positions?’ Well, this draw is your chance. Bitcoin corrects, cascade of liquidity is taken on altcoins and deep troughs present significant opportunities. Nothing significant has changed, just a correction.
At press time, Bitcoin price was trading at an important support level, changing hands at $29,166.
Featured image from iStock, chart from TradingView.com
