Why This Investor Fled His Bitcoin Position, Should You Do The Same?
10 September 2021 - 12:00AM
NEWSBTC
Bitcoin has been moving sideways in the past day after a 20%
dropped at the start of the week. The first cryptocurrency by
market was showing strong conviction to the upside, but ultimately
the excessive greed in the market could have played against the
bulls. At the time of writing, Bitcoin trades at $46,875 with a
1.2% profit in the daily chart. A recent report by QCP Capital
confirmed that the flash crash was preceded by an increase in
leverage positions on the derivatives sector. The firm previously
warned about the potential downside risk as derivatives were
signaling “nervousness” amongst investors. When the price of
Bitcoin broke the $52,000 barrier, the outlook “worsened”, the firm
said. In addition, there was a sentiment of “disbelief” in the
market that the rally that took Bitcoin into those levels was
unable to “fail”. In previous months, May, June, and July, a
similar situation occurred with a “Buy the rumor, sell the news”
catalyzer, in this case the implementation of the Bitcoin Law in El
Salvador. In addition to an increase in fair and uncertainty due to
the Securities and Exchange Commission (SEC) cracked down on crypto
exchange Coinbase. Related Reading | Bitcoin On-Chain Data
Reveals Why This Selloff Is Different From May’s Crash In that
sense, investor Alex Wice took to Twitter to announced that he has
“exited” his Bitcoin position. Wice believe the outlook in the
market has changed with the recent crash. The rally from near BTC’s
price yearly open started driven by a fresh surge in institutional
investment. Wice highlighted the participation of Alameda Research,
the investment arm of crypto exchange FTX, as bullish factor
previous to the crash. However, he added: Since this nuke, longs
are no longer cozy. We’ve changed from up only to ball game – we
update for nukes to be much more likely now. Overleveraging is
back. Post bounce, longs are low edge. We could even goblin town.
Bitcoin Data Speaks, Will The Bears Take Back Control? In that
sense, Bitcoin follow two scenarios, more “crab like” price action
in the coming days, as it did during May, and June, or a straight
dropped most likely back into the $30,000 levels. Analyst Ben Lilly
has found a correlation with the recent price action to the
downside and a cool off in the non-fungible tokens (NFT) sector. As
Ben Lilly pointed out, the EIP-1559 update as made Ethereum more
susceptible to variations in on-chain activity. Related Reading
| New To Bitcoin? Learn To Trade Crypto With The NewsBTC
Trading Course Similarly, Ethereum was one of the cryptocurrencies
leading the market during the rally. In addition, Bitcoin
fundamentals and other indicators turned bearish suggesting a
pullback, Ben Lilly added: (…) even the morning of the drop we
witnessed a transaction that tends to take place when a “by the
dip” opportunity is likely to happen. This is what I mean when I
saw a few odd transactions took place onchain that led us to
believe some of this was premeditated. Bitcoin could be at a
turning point, according to the analyst. In the coming days, the
fate of the bull-run could be decided if BTC’s price continues to
trend to the downside to form a “Bull/Bear Divide”, as seen below.
In that context, long term BTC holders will become importance.
Their activity, as measured by the Spent Output Age Bands (In pink
below), could indicate a “liquidity exit”. With that in mind, the
analyst doesn’t rule out a potential short squeeze and more
continuation if that holds, Ben Lilly added: With a quick change in
sentiment the market will sometimes prey on overly bearish
behavior. Meaning price can quickly squeeze out shorts who entered
late. Once this easy pickings scenario plays out we’ll see how the
structure looks. If it’s a big squeeze then maybe we can get
another attempt at $53k.
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