Is Bitcoin still on the verge of collapsing? BTC returns to normalcy after equities experience a condition that has occurred only twice this century.
Bitcoin (BTC) falling below $36,000 “smells like capitulation,” one trader warns as concern grows about the state of the US financial markets.
Analyst: “Forced liquidation” of stocks
Bitcoin bounced to levels last seen in February after tumbling to 10-week lows in lockstep with stocks on the May 5 Wall Street trading session.
The sell-off in both crypto and equities, which began the day before on the basis of projected Federal Reserve rate hikes, appeared to be more than traders planned for.
The S&P 500 lost 3.5 percent on the day, while the Nasdaq 100 lost 5%. Apart from stocks, US 10-year Treasury futures fell 1%, an uncommon occurrence that caused some market participants to pause for consideration.
Sundial Capital Research founder Jason Goepfert remarked that such a chain of events has transpired just twice in the preceding quarter-century – during the 2008 Global Financial Crisis and the March 2020 COVID catastrophe.
“Someone is exploding, and this is a forced liquidation,” he wrote on Twitter.
There have been 2 days in the past 25 years when S&P 500 futures were down 3% and 10-year Treasury futures down 1%:
👉 October 9, 2008
👉 March 18, 2020
Someone is blowing up, and this is forced liquidation.
— Jason Goepfert (@jasongoepfert) May 5, 2022
As such, the chain reaction that drew in Bitcoin may have been the capitulation event that many had previously said was essential due to shifting economic conditions in the United States.
“To me, that smacks of submission or at the very least very severe messages in general,” Van de Poppe said.
He also noticed that the dip caused the largest volume 4-hour candle on BTC/USD since early December. Volume was a critical component that had to be restored in order to create a more convincing capitulation scenario.
Meanwhile, TradingView indicated that some quiet had returned to the Bitcoin markets overnight.
Liquidations of BTC long positions at January highs
However, upon assessing the dip’s effect on hodlers, it appeared as though the day’s losses had not resulted in a complete market reset.
Liquidations across cryptocurrencies remained relatively muted, with BTC accounting for $190 million in the 24 hours at the time of writing. This was the greatest daily total in previous months, but fell short of January’s $32,000 cascade.
The remaining $200 million was generated by altcoin pairs, according to data from on-chain monitoring service Coinglass.
“Regardless of what I say in the short term, macro continues to be bearish,” noted prominent trader Crypto Chase.
“There will be bounces, pops, squeezes, and short-term euphoria, but I don’t believe we will see macro reversals prior to big collapse OR the Fed reversing its stance on rate hikes/QT/balance reduction.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.