Earlier today, Bitcoin (BTC) flash crashed as low as $40,400 before rebounding to spot levels. This sudden drop triggered what Mike Alfred, a cryptocurrency investor, said: said was a “textbook wash” necessary to liquidate the speculators.
The decline and rebound, Alfred further explained, “wiped out open interest and is exactly what you want to see” before prices recover, possibly reaching $48,000 over the next few sessions.
Bitcoin drops, more than $120 million liquidated
The collapse, if it even exceeds the guides, could have shaken sentiment, forcing holders and inexperienced traders to take profits, thereby allowing holders more control. If so, since the uptrend persists when Bitcoin price action is analyzed from a top-down view, it could provide the basis for further gains in the days to come.
Besides the increased volatility and the likelihood of potential profit-taking volatility, the resulting correction also led to some liquidation. According to Coinglass data On December 11, the flash crash saw more than $105 million in leveraged long positions liquidated.
Conversely, more than $15 million in short positions were forcibly closed as prices quickly recovered, going against the positions of some traders.
In responding to Alfred’s insight, some observers note that the liquidation of highly leveraged long positions effectively eliminated bearish elements from the market. In turn, this has paved the way for further price increases in the days to come.
Will BTC float to new all-time highs?
Looking at the daily Bitcoin price chart, the uptrend remains even as the coin consolidates in shorter time frames. It remains to be seen whether today’s massive sale will be confirmed in the next 24 hours.
However, based on the arrangement of the candlesticks in the daily chart, the long lower wick suggests that the lower lows are rejected. Notably, the coin enjoys support at the 20-day moving average, highlighting the importance of this dynamic line.
The price chart shows that the $45,000 level constitutes critical resistance. If there is solid, high volume growth above this level, BTC could not only surpass $48,000 and $50,000 but could also anchor the rise towards $69,000 in the coming weeks.
Market participants view the potential approval of the first Bitcoin ETF in early January 2024 by the Securities and Exchange Commission (SEC) as a bullish catalyst for BTC bulls.
Amid evolving crypto regulations in the US, Europe and beyond, a regulated ETF would provide institutional investors with a more accessible way to gain exposure to Bitcoin, which could boost demand and drive up prices .
Featured image from Canva, chart from TradingView