The price of Bitcoin (BTC) fell from USD 10,000 to USD 8,100 in just over a day, while dropping 9% in a single hour. It liquidated $200 million worth of long positions, destroying the futures market.
The three key reasons that triggered the huge Bitcoin correction were: a strong multi-year resistance area above USD 10,000, whales moving to short the BitMEX market, and extreme pre-halving volatility.
USD 10,200 to USD 10,500 is a strong multi-year area of resistance for Bitcoin
From mid-2018, the range of USD 10,200 to USD 10,500 served as a historically strong resistance area for the best rated cryptomone currency by market capitalization.
After its first rise above USD 10,500 in June 2019, which led to a rapid rebound to USD 14,000, Bitcoin failed to move above that level five out of six times in the last two years.
Bitcoin’s price rebound stops at $10,000, but those who buy on falls should look at these levels
Bitcoin rejects $10,000 ahead of halving
When the Bitcoin price initially broke at USD 10,100 on May 8, it signaled the rejection of a key resistance level and left BTC vulnerable to a sharp correction.
When the whales began selling at USD 9,900, this led to a cascade of long position contract settlements mainly at BitMEX and Binance Futures. In one hour, more than USD 200 million in long positions were liquidated.
The whales moved quickly to sell BTC at the rejection point
Almost as soon as the rejection of $10,200 was confirmed, the whales began ferociously shortening Bitcoin at the major cryptomone exchanges.
Open interest in the four major derivatives exchanges including Binance Futures, BitMEX, Deribit and OKEx plummeted. The term open interest refers to the total number of contracts in long and short positions that are open at any given time.
Bitcoin halving will make miners no longer the biggest sellers at BTC
Open interest of BitMEX Bitcoin futures contract
The rapid decline in open interest meant that as selling pressure began to build up, it caused over-leveraged buyers in the futures market to become trapped in their positions.
The funding rate at Bybit, Binance Futures and turkish lawmaker proposes national cryptocurrency, jump some 500 percent, accelerate bank runs, visa, mastercard, paypal and coinbase, crypto mining facility, $1 billion token sale, use visa and mastercard, $30m funding round, a proponent of mimblewimble, the swift trial remained at about -0.05%. A negative funding rate when the BTC price drops means that the overwhelming majority of the market has short contracts, waiting for BTC to fall even further.
In other words, many traders, especially wholesalers, who bet against BTC at a critical point of reversal of a long-term trend triggered a sharp drop in a short period of time.