Earlier today, Bitcoin (BTC) flashed as low as $40,400 before returning to spot levels. This sudden drop triggered what Mike Alfred, a crypto value investor, said: said was a “textbook disaster” necessary to liquidate speculators.
The decline and recovery, Alfred further explained, “has wiped out open interest and is exactly what you want to see” before prices recover and potentially rise to $48,000 in the coming sessions.
Bitcoin Falls, Over $120 Million Liquidated
The washout, even if it went beyond guidance, might have dampened sentiment and forced inexperienced holders and traders to take profits, giving holders more control. If this is the case, considering that the uptrend continues when analyzing Bitcoin's price action using a top-down preview, this could set the stage for further gains in the coming days.
In addition to increased volatility and the likelihood of potential profit-taking, the resulting correction also led to some liquidation. According to Coinglass Data On December 11, the flash crash resulted in over $105 million worth of leveraged long positions being liquidated.
Conversely, more than $15 million worth of short positions were forcibly closed as prices recovered quickly, running counter to some traders' positions.
Bitcoin liquidations | Source: Coinglass
While reacting to Alfred's preview, some observers said written down that the liquidation of highly leveraged long positions has effectively removed bearish elements from the market. This, in turn, has paved the way for further price increases in the coming days.
Will BTC reach new all-time highs?
Looking at the Bitcoin daily price chart, the uptrend remains intact even as the coin consolidates on shorter time frames. It remains to be seen whether today's sell-off will be confirmed in the next 24 hours.
However, from the candlestick arrangement on the daily chart, the long lower wick suggests lower lows are being rejected. Notably, the coin is finding support at the 20-day moving average, highlighting the importance of this dynamic line.
The price chart shows that the $45,000 level is a critical resistance. If there is solid, high volume growth above this level, BTC could not only rise above $48,000 and $50,000 but also anchor a rise towards $69,000 over the next few weeks.
BTC price trending down on daily chart | Source: BTCUSDT on Binance, TradingView
Market participants are viewing the possible approval of the first Bitcoin ETF by the Securities and Exchange Commission (SEC) in early January 2024 as a bullish catalyst for BTC bulls.
As crypto regulations continue to evolve in the US, Europe and beyond, a regulated ETF would provide institutional investors with a more accessible way to gain exposure to Bitcoin, potentially driving demand and driving up prices.
Feature image from Canva, chart from TradingView
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