Here are three major factors that caused the Bitcoin price drop that the traders should know!
Bitcoin price has dropped by 14% in value, from $ 10,150 to $ 8,600 on BitMEX in less than 15 minutes. There are three main reasons that can explain this Bitcoin crash.
- Bitcoin Price Fell Below $ 9,500, Losing Momentum To $ 11,000 But Still Full Of Hope For The BTC Spot Market
#1: Long squeeze
Before the price was adjusted, funding rates for Bitcoin and Ether were respectively 0.16% and 0.19%.
The funding rate is the fee that alongside or short contracts pays to the other side to help maintain a balanced position in the market. The funding rate mechanism helps the market to be short or overwhelmed by the short-term side.
A signal that the instability of Bitcoin’s fall last night was that the funding rate of Bitcoin was very high, with 75% of traders holding long positions.
Most traders have predicted that the price of Bitcoin will rise and show that desire by opening long positions. The inevitable result was that the “long squeeze” happened, liquidating over $ 120 million worth of long contracts.
Total liquidation on BitMEX | Source: Skew
The price of BTC dropped as soon as the US session opened, showing that the Bitcoin CME futures market has contributed a significant part to this Bitcoin sell-off.
PlanB investor commented:
#BTC crashes -$1000 in 15 minutes on US opening (exact same time and volumes as May 20 and May 21)
— PlanB 🔴 (@100trillionUSD) June 2, 2020
#2: Bitcoin price reacting to a multiyear resistance at $10,500
Bitcoin has tested the $ 10,500 resistance three times over the past 8 months. The market-leading cryptocurrency rose to a peak of $ 10,500 in October 2019. Within the next 4 weeks, BTC fell to $ 6,400, hitting a bottom within 6 weeks.
In February, Bitcoin made another attempt to break through the $ 10,500 resistance. After an intense rejection of $ 8,400, BTC dropped to as low as $ 3,600 in the following four weeks.
And, this is the third time BTC has tested the same level in the past three quarters, and the third time BTC has encountered the same reaction.
#3: Whales dumping
Hours before the Bitcoin dump was strong, the whales transferred money to BitMEX and Binance.
Ki Young Ju, CEO of CryptoQuant, said:
— Ki Young Ju (@ki_young_ju) June 2, 2020
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