Bitcoin (BTC) remained near a two-month low at the August 18 Wall Street open as markets came to terms with extreme liquidations.
“Drying liquidity” amounts to BTC price key support
Data from Cointelegraph Markets Pro and TradingView shows BTC price action tracking sideways after a daily candle produced an 8% loss.
The largest cryptocurrency saw a cascade of liquidations in the derivatives market, which it attributed to an “outsized” majority amid relatively slow sales in the area.
“On Deribit it is likely that a large account was wiped, considering the large number of short liquidations that occurred together,” wrote trading firm QCP Capital in a market update sent to channel subscribers on Telegram of the day.
QCP, like others, noted that the market’s reaction to the alleged trigger — a write-down of SpaceX’s $373 million BTC holdings — appeared exaggerated.
“This brings back the 2021 and 2022 ghosts of Elon-driven highs and lows, and we certainly hope that the market will not return to those times again,” it continued, referring to previous Bitcoin sales and co. comments from Elon Musk, joint CEO of SpaceX and Tesla.
Total liquidations challenge those seen after the FTX exchange meltdown – the event that resulted in BTC/USD falling to a two-year low of $15,600 in November 2022.
“This feels like another sign of the drying up of liquidity markets have seen in the last few weeks,” financial commentary resource The Kobeissi Letter added in part self-reaction.
Analyst: The sales volume in the area is still 50% below the high of 2023
As the price of BTC slowly drifted towards $26,000, market participants differed on the true nature of the situation and its future implications.
Related: How low is the price of Bitcoin?
For the famous trader and analyst Rekt Capital, the picture is not good – a double top formation for BTC/USD in 2023, and a complete lack of support from trend lines and moving ones average during the collapse.
“BTC formed a Higher High at ~$31000 on inclined volume. But the price formed the second half of its Double Top on declining volume,” he WRITES in part to many X posts.
An accompanying chart shows trading volume in daily timeframes, as Rekt Capital cautions that the yield may not yet match past sales.
“Although there is a small breakout in seller volume in this crash… It is nowhere near the level of Seller Exhaustion volume (green box) in previous BTC reversals (yellow circles),” he explained.
“In fact, current Seller Volume would need to double to reach the level of Sell Volume that triggered the price changes in early March and late June as well as mid- June.”
Others are more optimistic, including the trader CryptoCon, who identified the key two completed tasks common to the successful rebound of the BTC price during the retreat of the bull market.
It involves relative strength index (RSI) values that bounced off the 0.382 Fibonacci retracement level.
“Each cycle, the Weekly Bitcoin RSI experiences fake out of the bull market start line, some longer than others,” he MEAN.
“And each of them revisited the .382 Fibonacci retrace move. With the latest leak, both things are now complete. “
Rekt Capital noted that the daily RSI is now the most “oversold” since June 2022, with only two periods in the history of Bitcoin, both in bear markets, that beat it.
Looking ahead, the QCP has meanwhile flagged next week’s comment from Jerome Powell, Chair of the United States Federal Reserve, as the next potential source of volatility.
“We believe that many will now be in Powell’s speech at Jackson Hole next week,” it concluded.
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