Last night the bitcoin rate fell from 9,237 euros to 8,612 euros. Anyone who has been in crypto for a while knows the tricks of the trade. But for all newcomers who have recently entered bitcoin: this is part of it. In this article we look at possible causes and explain the decrease on the basis of a short technical analysis.
Before we dive into the depth, three tips for newcomers:
- Take a breath and drink chamomile tea.
- The cryptomarket is relatively small and young. Volatility is now included.
- At this stage of the market cycle, bitcoin seems to set the tone for the rest of the market. Is bitcoin falling? Then most altcoins fall with it.
Above you can see the price trend from last night. The exchange rate went from 9237 euros to 8,612 euros. Do you want to play with the price chart and view various statistics yourself? Then check our course page:
$ 144 million in long positions liquidated
On BitMex you can gamble on the course. You guess whether the rate goes down (going short) or up (going long). If you are too far off your short or long position will be liquidated and you will lose your stake. On BitMex you can see that 144 million dollars in long positions have been liquidated.
The price falls and this caused a chain reaction, if the price falls long positions are closed and that in turn causes the price to fall even harder and this in turn causes more long positions to be closed and this again causes that the rate falls, etc. This is called a long squeeze. All long positions are squeezed out as lemons.
And in the beginning
But what led to the initial price fall? BitMex is mainly for private individuals, but there is also a variant for the big boys with institutional money. This service is offered at the Chicago Stock Exchange and is called CME. Here too you conclude contracts to go short or long. These contracts have a specific duration and almost 50 percent of all these contracts expire on 30 August. This is definitely a prelude to price volatility.
Analyst Dave Balter says about this: “From our perspective, it looks like many futures contracts have already been settled because they expire on Friday.”
Jeff Dorman of Arca thinks this is indeed the cause but also hints at market manipulation by whales: The volumes are low and it now costs very little to move the bitcoin market up and down. Combine that with the fact that large contracts expire at the end of the week.
Dorman claims that there is not enough bullish sentiment to sustain the bitcoin price.
Relatively strong
#bitcoin still looking strong… feels like mid 2016 pic.twitter.com/lddKSEETye
– PlanB (@ 100trillionUSD) August 29, 2019
Above you see a long-term analysis of a reputable analyst: PlanB. The twitterer mainly looks at the Relative Strenght Index (RSI). This is a momentum indicator that is scaled between 0 and 100. RSI compares the closing price of a candle with the closing price of the previous candle.
Is the RSI above 70? Then you speak of an overbought momentum. Is the RSI under 30? then you speak of an oversold momentum. We are currently floating between these two values. PlanB makes the comparison with 2016 and that later proved to be the prelude to bitcoin to climb to an all time high. In 2016 you will also see that the yellow balls make a small dip.
He / she confirms this again below:
Everything is possible of course, but I think these RSI moves from <50 to >90 are longer term trends (that do not break easily) with a lot of noise around it. pic.twitter.com/uUbC2PxyHR
– PlanB (@ 100trillionUSD) August 29, 2019
What do you think? Reason for panic or a good time to buy extra?
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