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Bitcoin has been moving sideways in the past day after dropping 20% at the start of the week. It was the first cryptocurrency by the market to show a strong bullish conviction, but in the end, excessive greed in the market played against the bulls.
At the time of writing, Bitcoin is trading at $46,875 with a gain of 1.2% on the daily chart.
newly Report QCP Capital confirmed that the rapid crash was preceded by an increase in leveraged positions in the derivatives sector. The company previously warned of potential downside risks as the derivatives signaled “tension” among investors.
The company said that when the bitcoin price broke the $52,000 barrier, the outlook worsened. In addition, there was a sense of “disbelief” in the market that the rally that had brought bitcoin to those levels was unable to “fail”.
In the previous months, May, June and July, a similar situation occurred with the “buy the rumor, sell the news” catalyst, in this case the implementation of bitcoin law in El Salvador. In addition to an increase in fairness and uncertainty due to the Securities and Exchange Commission (SEC) cracking down on crypto exchange Coinbase.
Related reading | Bitcoin On-Chain Data Reveals Why This Sale Is Different From the May Crash
In this sense, investor Alex Wice took to Twitter to announce that he was “walking out” of his Bitcoin position. Weiss believes that the market’s outlook has changed with the recent crash.
The rally from the near annual opening price of BTC was driven by a fresh surge in institutional investment. Weiss highlighted the participation of Alameda Research, the investment arm of crypto exchange FTX, as a bullish factor before the crash. However, it is added:
Since this nuclear weapon, long things are no longer convenient. We’ve changed from just a ball game – and are upgrading nuclear weapons to be more bearable now. Excessive leverage is back. After the bounce, the long positions are a lower edge. We can even imp town.
Bitcoin data speaks, will bears regain control?
In this sense, Bitcoin follows two scenarios, a more “crab-like” price movement in the coming days, as it did during May and June, or a likely direct drop to $30,000 levels.
Analyst Ben Lilly found a correlation with the recent price action to the downside and calming in the non-fungible tokens (NFT) segment. As Ben Lilly pointed out, the EIP-1559 update made Ethereum more vulnerable to changes in on-chain activity.
Related reading | New to Bitcoin? Learn How to Trade Cryptocurrencies with NewsBTC Trading Course
Similarly, Ethereum was one of the cryptocurrencies that led the market during the rally. In addition, Bitcoin fundamentals and other indicators have turned bearish indicating a pullback, Ben Lilly added:
(…) Until the morning of the bearish day, we saw a trade that tends to occur when a “downward” opportunity is likely to occur. This is what I mean when I saw some single transaction happening on a chain which made us think some of this was premeditated.
Bitcoin may be at a tipping point, according to the analyst. In the coming days, the fate of the uptrend could be decided if BTC price continues downtrend forming a “bullish/downward gap”, as shown below.
In this context, long-term BTC holders will become important. Their activity, as measured by the depleted production life ranges (in pink below), can indicate a “liquidity out”.
With this in mind, the analyst does not rule out the possibility of a short squeeze and further continuity if this continues, Ben Lilly added:
With the rapid change in sentiment, the market may sometimes prey on excessive bearish behaviour. The price in question can quickly put pressure on shorts that entered late. Once we implement this easy picking scenario, we will see what the structure looks like. If it’s too much pressure, maybe we can get another try at $53,000.
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