On Thursday, three critical downside events took Bitcoin (BTC) price to $25,200. On-chain data examines why bitcoin price has fallen and what price movements to expect in the coming weeks.
Bitcoin briefly fell below $25,200 on Thursday, its lowest level since early June. A bearish $373 million trade from Elon Musk’s SpaceX had started the initial downtrend. Since then, however, two other, seemingly unrelated, significant events have occurred.
Why Did Bitcoin (BTC) Price Plunge to $25,000?
Three factors have been identified as the main triggers behind the August 17 BTC price crash.
Notably, a Wall Street Journal news report revealed that Elon Musk’s SpaceX depreciated the value of Bitcoin (BTC) it owned by $373 million before selling it all. Within hours of the report, BTC price fell below the $27,500 support area.
In addition, shock waves from the news of Chinese real estate giant Evergrande filing for bankruptcy may also have contributed to Bitcoin’s sharp decline.
These two major bearish events combined triggered the third – massive liquidations in the crypto markets.
According to a blockchain analysis platform, Coinglass, over $834 million worth of crypto long positions were liquidated in 24 hours. The chart below shows that Bitcoin traders took 40% of the heat and over $499 million worth of long BTC positions were wiped out.
Reasons behind Bitcoin (BTC) price drop | Liquidation Heatmap, August 18, 2023 | Source: Coinglass
In the context of crypto margin trading, a liquidation event is triggered when the price of the asset decreases significantly and the resulting losses exceed the value of the collateral or “margin” posted by the trader.
The chart above means that investors who were long/positive on BTC have suffered losses of more than $499 million in the last 24 hours.
When traders’ positions are liquidated due to margin calls, they are often forced to sell their assets quickly. This influx of sell orders can create an oversupply of Bitcoin and potentially cause prices to fall further in the coming days.
American institutional investors buying the dip could be a lifeline
While crypto traders grappled with their losses in the futures markets, a key on-chain data point shows US institutional investors taking advantage of the price drop.
CryptoQuant’s Coinbase Premium Index shows the percentage difference between BTC prices on the Coinbase Pro and Binance spot markets.
While Binance dominates the retail spot market, Coinbase Pro is largely dominated by US-based institutional and high net worth traders. Positive values of the premium index values therefore indicate a easing of buying pressure from US investors on Coinbase.
The chart above shows that the Coinbase Premium Index turned positive for the first time in August. This presumably means that US investors have taken advantage of the decline to acquire more BTC.
This upward trend in the Coinbase Premium Index could boost retail investor confidence in the coming weeks.
In summary, the sell-off of Elon Musk’s SpaceX, the shockwaves from Evergrande’s bankruptcy filing, and $499 million worth of bitcoin liquidations are some of the crucial reasons why the bitcoin price hit $25,000 has fallen.
However, growing institutional demand in the US could provide a lifeline for nuclear-bombed traders and potentially spark a modest recovery.
BTC Price Prediction: Slight recovery towards $29,000
BTC could recover slightly on buying pressure from wealthy US institutional companies and traders looking to avoid further liquidations.
The In/Out of Money Around Price (IOMAP) data, which shows the purchase price distribution of current Shiba Inu owners, also supports this assumption.
As shown below, the 1.21 million addresses had bought 670,000 BTC at an average price of $28,000. If they anticipate another downturn, they could sell and trigger another drop.
However, if industry-wide headwinds ease, BTC could reach $29,000.
Still, BTC could fall towards $24,000 if the bears stay in control. However, 351,000 holders had bought 144,000 BTC at an average price of $25,400. If they remain resilient, BTC could bounce back from this range.
However, if these recovery efforts fail, BTC could sink towards $24,000.
Disclaimer
In accordance with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, however, market conditions are subject to change without notice. Always do your own research and consult a professional before making any financial decisions.
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