Bitcoin Price Was Hit By Massive $ 2.7 Billion Futures Sell-Out: What’s Next??

After a strong cascade of liquidations, the price of Bitcoin could recover, based on the fundamentals of the network.

More than $ 2.7 billion in futures contracts were settled in the last 24 hours, according to data from Bybt.com. This caused the price of Bitcoin (BTC) to experience a huge drop in a short period of time, as it fell from more than $ 41,000 to less than $ 32,600.

Why did the massive selloffs cause the price of Bitcoin to drop?

In the futures market, position liquidations occur because traders are borrowing additional capital to trade larger positions.

For example, exchanges in the Bitcoin futures market typically offer up to 100x leverage. This allows traders to borrow 100 times their starting capital to trade BTC.

The downside of leverage is that when the price of Bitcoin goes down, it can cause a position to be liquidated or worthless.

More than $ 2.7 billion in futures contracts were settled in the last 24 hours, according to data from Bybt.com. This caused the price of Bitcoin (BTC) to experience a huge drop in a short period of time, as it fell from more than $ 41,000 to less than $ 32,600.

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For example, let’s say a trader uses 10 times leverage and borrows 10 times his capital to buy Bitcoin at $ 40,000. If the price falls 10% to $ 36,000, the position would be liquidated.

When a long position is liquidated, the position is sold to the market. Therefore, if the majority of the market looks to buy Bitcoin and the long contracts start to be liquidated, a pressure to sell is created.

On January 11, the Bitcoin market experienced a large, prolonged contraction triggered by large sell orders on Coinbase. As whales or high net worth investors sold, it caused many long contracts to be liquidated in a matter of hours.

Back-to-back liquidations caused a domino effect, leading to a strong liquidation and a 16% correction.

But, an optimistic sign is that the correction ended at around $ 32,700, which Whalemap analysts described as a whale group support area.

A group of whales is formed when the whales buy Bitcoin at a certain level and do not move them. This level often becomes an area of ​​support because the whales are likely to double their entries if a major drop occurs and the price of BTC falls back to that level.

What comes next?

Although Bitcoin took a big dip, the general market sentiment around BTC remains bullish overall.

As Cointelegraph reported, Elias Simos, a protocol specialist at Bison Trails, noted that the number of whales actually increased after Bitcoin took a huge price drop.

The trend shows that the whales were actually piling up as the liquidation cascade was taking place, which is positive. Simos wrote:

“Addresses with more than $ 1k BTC continue to grow at the expense of all others, even as this most recent recession is taking effect. While you were selling, the whales were devouring your bitcoin. “

Analysts at Glassnode, an on-chain analytics company, explained that Bitcoin’s fundamentals remain intact despite the drop. They emphasized that the hash rate of the Bitcoin network and the mining difficulty are still at all-time highs. Analysts noted:

“While the value of $ BTC was down today, the fundamentals of the chain remain strong, pointing to a healthy network. The bitcoin mining difficulty and the hash rate are at ATH ”.

While this current 15% -25% is the biggest pullback for this bull cycle to date, it is worth noting that numerous 30% corrections occurred during Bitcoin’s 2017 bull cycle.

As Cointelegraph previously reported, the current BTC price pullback coincides with a possible bottom formation of the Dollar Strength Index.

Referencia: es.cointelegraph.com

Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.

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