The Bitcoin (BTC) market has been in turmoil over the past 24 hours following a series of reports of problems. During this period, the cryptocurrency market leader recorded a notable decline, with the price falling below the $66,000 price mark. However, a cryptocurrency analyst with the username Luca hypothesizes that this recent price drop could be due to other factors besides news events.
Bitcoin crash was caused by an overleveraged market, not a news event: Analyst
On Friday, the Wall Street Journal reported that Tether is under investigation by US authorities over possible misuse of the USDT stablecoin in crimes such as money laundering, drug trafficking and terrorism.
Such damaging reports regarding USDT, which ranks as the largest stablecoin, appear to have triggered bearish sentiment in the cryptocurrency market, with BTC falling to around $66,000 before a rebuttal statement by Tether management. I did. While partially recovering, reports of Israel's attack on Iran also triggered a downtrend, forcing Bitcoin to hit a local low of $65,700. Overall, BTC is down 4% from around $68,602 on Friday.
However, in Saturday's X post, Luka said the price drop was due to high open interest rather than a supposed news event. Cryptocurrency analysts explained that amid Bitcoin's downward trend, open interest has also decreased by 9%, indicating that the market is highly overleveraged.
Luca said Bitcoin's recent rise from $59,000 on October 10 to $69,000 on October 21 was driven by perpetual contracts with little or no spot investment. . Therefore, the rally was always temporary, and massive liquidations and price reversals were certain.
Will BTC head towards $60,000?
Regarding Bitcoin's high open interest, Luca also noted that liquidation heatmaps show that significant liquidations are occurring in positions known as support zones, and these positions are highly leveraged. He says it's very expensive.
Following the recent price decline, analysts highlighted that $65,000, which represents a major support level, is one of the highly leveraged zones with several long positions. Luca believes that if a retest occurs, Bitcoin bulls will likely lose this support zone and BTC will likely fall to $60,000, which is likely to remain as a valid support level for now. are.
At the time of writing, Bitcoin was trading at $67,001, up 0.50% on the previous day. Meanwhile, the asset's daily trading volume decreased by 28.23% and its value stood at $26.93 billion. With a market capitalization of $1.32 trillion, Bitcoin remains the world's largest digital asset.
Featured images from Kinesis Money, charts from Tradingview
