BTC prices fell 6 percent to $8,620 within five minutes on Sunday shattering short-term bitcoin price predictions. The price decline affected all major trading platforms leading to fears that current prices might be overinflated.
The bitcoin market downturn had a domino effect on 20 of the most popular digital currencies. The prime digital currency traded at just over $9,000 before the semi-momentous plunge. It was the steepest decline this year, but the bulls appear to be slowly regaining control.
So, What Caused The Sudden Price Dip?
Liquidation of overleveraged long positions is believed to have caused the bloodbath. Bitcoin prices had risen by over 20 percent in the preceding weeks. The mini-rally was technically bound to hit a snag due to price inflation.
Liquidation typically occurs when a sudden plummet in prices dissolves long overleveraged market positions. Once the liquidation limit is reached, traders are forced to sell the digital assets put up as collateral.
About $110 million was liquidated on BitMEX alone during the price decline. This is according to data illustrated on DataMish. The figure represents about $15 million in actual assets. The platform offers 100 times leverage. It is likely that there was more liquidation on Binance, Deribit, and Kraken. Some analysts had warned that the recent price escalation lacked key drivers and feared that a pullback within the month was imminent.
Bitcoin prices are expected to skyrocket once the halving episode occurs. It leads to a 50 percent reduction of mining rewards, thereby causing a scarcity of coins. This subsequently leads to a surge in demand. The event is set to take place in May, but until then, the more conservative approach is short-term bearish but medium-term bullish.
Current Bitcoin Prices More Psychological Than Technical
Right now, BTC trade volumes are down globally as compared to last year. They match mid-2017 figures. It is probable that users are choosing to hold rather than trade in their cryptocurrency stash.
Right now, BTC trade volumes are down globally as compared to last year.(Image Credit: CoinDance)
In a nutshell, the current market movement seems to be more psychological than technical as there doesn’t seem to be a direct correlation to demand.
(Featured Image Credit: Pixabay)