Bitcoin has dropped below $60,000 as a critical level, reaching an all-time low of $57,914. Bitcoin’s price has fallen by a further 7 percent since Tuesday. This reinforces the downward trend. Market sentiment has shifted to the negative side.
Bitcoin crash in May 2021: Is it imminent?
Andrew Kang has been named co-founder at Mechanism Capital. raised There are serious concerns about the Bitcoin pattern that is emerging, which reminds us of the circumstances leading to the crash in May 2021. Kang shared a thorough analysis via X, formerly Twitter. In it he highlighted how critical the current market dynamics are.
Kang stated “Most market participants are not appreciating the significance of a potential loss of a 4-month range on Bitcoin. The closest parallel we can draw is to that of the range of May 2021 where we also came off a parabolic rally of BTC and alts.”
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He noted that the current market situation is similar, especially in terms of leveraged position, which exceeds 50 billion dollars. “This figure does not include the Chicago Mercantile Exchange (CME), which is higher, but compounded by the fact that in this scenario we have ranged even longer (18 weeks vs. 13), and we have not had extreme washouts yet while we had a few in the middle of the 2020-2021 bull market,” Kang elaborated.
Kang has also revised his predictions for Bitcoin’s bottom. He now expects a more steep fall. “It’s likely that my initial estimates of low $50ks were too conservative and we see a more extreme reset to $40ks.” He cautioned that such a move back could be damaging to the market and would require a period of consolidation followed by a decline before an upward trend can possibly reverse.
In a dialogue with Alex Krüger, a well-known macro and crypto analyst, the discussion explored the intricacies of open interest (OI) In the derivatives markets, understanding sentiments and biases is crucial. Krüger pointed out, “Much of that OI is not directional though,” This suggests a market with a much more complex behavior, than simple long-term and short-term positions.
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Kang responded by clarifying the composition of OI. “Each unit of OI is one long + one short. Even if there are basis trade shorts on the short leg, there’s a directional long on the other end. So yes… less directional shorts.” Conversations continued to explore whether or not derivatives traders were delta-neutral, and if this affected market stability.
Krüger queried about market maker positions, and Kang responded, “I can assure you that there are not many market makers in the OI that are delta neutral long perps and short spot paying funding/borrow on both ends for a negative carry trade.”
What happened in May 2021?
Experts are increasingly concerned about the risk of another crash like the one in May 2021. In that time, Bitcoins’ price plunged dramatically after reaching a high of $64,000 around mid-April. At the end June it was down 56%. A combination of factors led to this crash, including the regulatory aspect. crackdowns in China, Influential figures such as Tesla CEO Elon MuskThis has led to a cascade of panic sales among retail investors and institutions.
According to Kang, similar conditions could be forming today, with high leverage and extended periods without significant price corrections, suggesting that the market may be on the brink of another severe downturn. Kang believes that similar conditions are forming today, with the high levels of leverage and the extended period without any significant price changes, which could indicate that the market is on the verge of another downturn.
BTC was trading at $58,736 as of the time this article went to press.
Featured image created with DALL·E, chart from TradingView.com
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Source: www.newsbtc.com