Bitcoin and the broader crypto market have suffered harsh losses over the past two days. After trading above the psychologically important price mark of $30,000 on Tuesday, the BTC price was followed by a sharp downward correction on Wednesday, which dragged the entire crypto market down with it.
And an even deeper correction cannot be ruled out. At press time, BTC price fell below $27,900, ETH was trading just above $1,900.
A big reason behind the sell-off in the crypto market over the past few days has been funding rates for leveraged long bets. A large number of traders had recently opened bullish bets on a sustained rise in Bitcoin and Ethereum, an easy game for market makers to liquidate these positions through large sell-offs.
Liquidations of leveraged positions surpassed $262.5 million across the crypto market yesterday (Thursday), according to Coinglass. This is the highest level so far this year and shows that the greed in the market was too great.
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According to @coinglass_com data, the biggest long liquidation event of this year took place yesterday. pic.twitter.com/hzgx4fDeVJ
— tedtalksmacro (@tedtalksmacro) April 20, 2023
Each drop was bought by traders with leverage in anticipation of a bounce to the top of the range. This unhealthy market behavior must be flushed out of the market in order to generate a sustained price increase (as before) through spot purchases.
Bitcoin and crypto remain in the danger zone
Technical analyst and founder of Eight Global, Michaël van de Poppe, believes that Bitcoin is not out of danger just yet as the price is currently showing weakness:
Bitcoin is currently showing weakness. Broke back in the range, lost one of the crucial levels. The last crucial level is at $27,600. Could take liquidity down but needs a quick recovery. If not, and no break from $28,800, then I suspect we will see $26,200.
From an on-chain perspective, the $28,300 price level could be crucial as this is where the realized price of Bitcoin – UTXO Age Bands (1 week to 1 month) resides. As analyst Crazzyblockk writes about CryptoQuant, the level can be seen as a psychological level for people looking for short-term gains.
The reaction to this area could be helpful in assessing the strength or even weakness of the bulls. “If Bitcoin sees a short-term reaction at these levels, it will be a sign of renewed interest from these people to hold and enter, and if this level breaks, these players will continue to sell,” predicts the analyst.
Traders should also keep an eye on the US Dollar Index (DXY) as US Dollar strength will be a headwind for the crypto space. As we have reported in previous market updates, the DXY could initially gain strength before making new lows in the coming weeks, as Glassnode co-founders anticipate.
While this doesn’t change the overall bullish chart picture for bitcoin and crypto so far, key levels could soon come into focus. As noted today by renowned analyst Pentoshi, the $25,000 area is becoming crucial for a higher low on larger timeframes.
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$BTC
The first area for 23 has been marked. Said all year round that this would be the most interesting place to sell. I have? NO!
I think NEW lows are extremely unlikely
Two of the most likely #1 outcomes was the range year. If so we can see below 20k again
Med Time Area to watch is a 25k area for a HL https://t.co/7gQDUVVbcE pic.twitter.com/E45TZhqglR
— Pentoshi 🐧 euroPeng 🇪🇺 (@Pentosh1) April 21, 2023
In addition, it could be problematic for risky assets if the US dollar continues to rally in the coming weeks and months. Notably, according to Bloomberg, hedge funds are betting on a significant appreciation in the US dollar for the first time in over a year.
At press time, bitcoin price was trading at $27,952, continuing the downtrend of the past two days.
BTC price 4 hour chart | Source: BTCUSD on TradingView.com
Featured image from iStock, chart from TradingView.com
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