What happened
In the cryptocurrency sector, wild swings are often taken for granted. Accordingly, some of the incredible moves we’ve seen among the top cryptos by market cap over the past few days may not necessarily feel out of the ordinary.
That said Bitcoin, etherAnd Dogecoins have both seen incredible moves up and down over the course of the last day.
Yesterday afternoon, between about 4pm and 5pm ET, these three brands plummeted about 7% in an hour. The move coincided with reports from blockchain analysis firm Arkham that crypto wallets were tied to defunct crypto exchange Mt. Gox, and the US government reporting large transactions. Since this report was published, these three tokens have recouped most of their losses but are still down 2.3%, 2.8%, and 3.1%, respectively, over the past 24 hours.
Interestingly, the rapid drop in bitcoin price took place just before the alert was tweeted, with some experts suggesting that hundreds of millions of dollars in liquidations were responsible for the movement of bitcoin, ethereum and dogecoin.
so what
It’s quite a coincidence that the mini-flash crash seen on these three tokens over the past day pretty much coincided with reports of large transactions from these two dormant accounts. These large transactions were reportedly unrelated, meaning it’s unlikely the US government sold or transferred assets that filed for bankruptcy on Mt. Gox, one of the first major crypto exchanges to be hacked and linked to allegations of fraud. However, it is difficult to say what exactly would have led to such a sharp move lower, leading to mass liquidations.
The most plausible explanation for the wild swings in these top three tokens are once again massive liquidations from leveraged positions. The crypto market continues to move more volatile, in part due to the relatively high use of derivatives by traders to place bets on the movement of certain cryptos. If all goes well, this can lead to faster upward moves. However, when these long contracts are liquidated (essentially creating selling pressure), downside moves can be accelerated.
What now
The fact that Bitcoin, Ethereum, and Dogecoin are working their way back into profitability after those massive moves yesterday afternoon bodes well for crypto bulls. With those liquidations out of the way, crypto investors appear to have focused on accumulating tokens on this slump. A buy-the-dip mentality appears to be forming again among top crypto assets, suggesting that the bull rally we’ve seen in digital assets so far in 2023 may still have some legs.
Of course, there are many macro factors that could derail the impressive rally we’ve witnessed this year. But for now, these top three tokens appear to have impressive bullish momentum.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.