After the sharp drop in prices on September 7, traders were caught off guard. Bitcoin sees digital assets fall below $43,000 This led to extensive liquidation in the derivatives market, with more than US$3.54 billion in liquidation.
The exchange’s settlement amount in the past 24 hours totaled US$3.54 and was cleared!
— CryptoDiffer (@CryptoDiffer) September 7, 2021
After the Labor Day holiday weekend in the United States, bullish sentiment has been on the rise because Bitcoin is officially recognized as El Salvador legal tender, But the celebration was quickly extinguished by the 16% drop of BTC.
Data from Cointelegraph Markets Pro with Transaction view It is shown that the sell-off of BTC started in the morning trading session and accelerated to midday, as the price of Bitcoin fell to a low of $42,837, and then buyers who bought on dips arrived to raise their bids above $46,500.
Here is what traders think about this rapid sell-off and what to watch out for as the market tries to digest the chaos of the day.
With the sell-off of BTC, the bulls were liquidated in large numbers
On-chain analyst Willy Woo conducted a fact-centric analysis of current market conditions, and he released the following tweet outlining today’s development.
Stocks are hedged when the market opens.
Some people dumped BTC.
Moderate level of fundamental inflows (sells).
Then stop hunting/liquidity collapse.
$1.1b of BTC is cleared.
Generally not supported by the fundamentals of investors on the chain.
The exchange is now out (buy)
— Willy Woo (@woonomic) September 7, 2021
As Woo pointed out, the wider financial market opened up the day’s risk aversion, which puts pressure on the cryptocurrency market, which cascades over time.
The subsequent sell-off led to the liquidation of $1.1 billion worth of Bitcoin, but the on-chain data does not indicate that investors are eager to liquidate their positions. Recent activities indicate that the exchange has re-entered the buying mode.
Woo’s follow-up tweets showed how unexpected the market trend is today, which is a good reminder that in the cryptocurrency market, risk management always needs to be kept in mind.
“It’s not entirely certain that WTF just happened, but it’s a series of events. The sell-off mainly occurred in the derivatives market (like most crashes).”
Possible outliers detected
Market analyst and Cointelegraph contributor Michaël van de Poppe provided a further analysis of today’s Bitcoin trends. He also emphasized the role of over-leveraged traders in today’s price movements.
#Bitcoin Lost the 49,000 USD level as key support and passed it.
What just happened?
Over-leveraged positions are liquidated in a chain reaction, resulting in huge wicks.
If the wick closes above USD 47/48K, it will be an outlier.
— Michaël van de Poppe (@CryptoMichNL) September 7, 2021
According to Poppe, if BTC can close above the range of US$47,000 to US$48,000 after this correction, then if the upward trend resumes, this move will be regarded as an abnormal value of the previously established trend and a good buying opportunity .
Not all traders are caught off guard
Not all market participants are ignorant of today’s downward trend, as highlighted in the following tweet by analyst and pseudonymous Twitter user Crypto_Ed_NL.
Fortunately, you were not liquidated in the corrective action earlier today?
Waiting for new, dry pants…maybe it’s not over yet! pic.twitter.com/DIp9USNfK7
— Crypto_Ed_NL (@Crypto_Ed_NL) September 7, 2021
Subsequent tweets include the following chart, showing the scene as the Crypto_Ed_NL warned.
“BTC has reached the green box. Let’s see how it bounced back… I think it should be this correction.
The overall cryptocurrency market value is now 2.103 trillion U.S. dollars, and Bitcoin’s dominance rate is 42.1%.
The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.