Bitcoin Market Reacts to Tether Investigation and geopolitical Tensions
The Bitcoin (BTC) market has been significantly disturbed over the last 24 hours following a series of troubling news reports. Amidst the volatility, the crypto market leader has recorded notable downfalls, slipping below the $66,000 price mark. However, a crypto analyst suggests that this recent price decline can be attributed to another factor beyond the news events.
Bitcoin Crash Due To Overleveraged Market, Not News Event: Analyst
On Friday, the Wall Street Journal reported that Tether was under investigation by US authorities. This revelation sent the crypto market into a tailspin, with Bitcoin plummeting to around $66,000 before Tether’s management issued a refuting statement. Tether, the largest stablecoin in the market, is rumored to have been used in illicit activities such as money laundering and drug trafficking. This bearish sentiment caused significant selling pressure, pulling Bitcoin lower.
Reports of geopolitical tensions, including an Israeli attack on Iran, further exacerbated the crypto market’s volatility. Bitcoin touched local bottoms below $65,700, marking a 4% drop from around $68,602 on Friday.
Analyzing the Bitcoin Market: Overleveraged and Vulnerable
However, in an X post on Saturday, Luca, a crypto analyst, attributed the price decline to a high Open Interest rather than the news events. Open Interest represents the total number of contracts, including both long and short positions, outstanding in a market. Luca pointed out that while Bitcoin’s price was falling, the Open Interest also dropped significantly by 9%, suggesting the market was highly overleveraged.
A Temporary Rally Driven by Perpetual Contracts
According to Luca, Bitcoin’s recent rally from $59,000 on October 10th to $69,000 on October 21st was primarily driven by Perpetual contracts, which allowed traders to leverage their positions substantially. These contracts require minimal initial margin, making them attractive for those looking to profit from price swings.
However, this rally was never sustainable due to the high leverage involved. Perpetual contracts are prone to high liquidations and price reversals, which were evident when the market corrected sharply, indicating overleveraged positions were being liquidated.
Bitcoin’s Future Beneath $65,000
Luca’s analysis brings into focus several critical levels in the Bitcoin market. The analyst highlights that $65,000, which represents a major support level, is one of the zones with highly overleveraged positions. These long positions are set up to be liquidated if there’s a retest of this level.
As a result, if Bitcoin’s price falls and retests around $65,000, the high leverage these positions are built on may cause them to be liquidated en masse. This could push Bitcoin’s price lower, with Luca believing that if this support level is lost, the asset may drop to $60,000, which could now hold as an effective support level.
Bitcoin Long-Term Market Dynamics
At the time of writing, Bitcoin continues to trade at $67,031, marking a 0.50% gain over the last day. However, the asset’s daily trading volume is down by 28.23%, indicating slowing momentum in the market. With a market cap of $1.32 trillion, Bitcoin remains the largest digital asset in the world, but its recent volatility underscores the importance of palliative events—like Tether’s news and geopolitical developments—and the role of market psychology in currency markets.
Conclusion
The Bitcoin market has faced severe turbulence over the past 24 hours, driven by significant news events and an overleveraged market. While the cryptocurrency has shown partial recovery, the potential for further price drops remains high. As investors navigate this volatile landscape, staying informed about the latest market analysis and developments is crucial.
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