Bitcoin (BTC) fell $ 9,000 in a matter of hours Tuesday because many traders had very high leverage positions and there was a lot of margin borrowing, one analyst believes.
On Wednesday, Willi Woo tried to explain on Twitter what caused the BTC / USD pair to plummet to $ 42,800 on Tuesday.
Woo: Bitcoin margin borrowing and open interest are behind it.
There are currently a lot of rumors going around about who or what is behind Bitcoin’s big slump. Analysts have tried to read from the data where this sharp decline began.
Some draw parallels with the March 2020 slump, which was caused by the Corona measures. But on Tuesday there were huge differences, as Woo explained.
“Leveraged positions have been sold, but investor purchases are much larger,” he says summarized.
“BTC flash crashes are caused by a deleveraging. Similar to the Corona slump, because the derivatives overreacted. But at the time it was supported by investors. This slump was something completely different and puzzles. Cheap coins.”
Woo believes the decline was due to margin borrowing and open interest. In a classic domino effect, positions unwound to produce a “cascade” of liquidations and a positive feedback loop, which severely impacted spot price.
Typo. Open Interest was NOT crazy high, it was within normal bounds.
– Willy Woo (@woonomic) September 8, 2021
The processes involved in this process are arguably a little too complex for the average observer. But the strength of the Bitcoin rebound and the continued strong buying by investors suggest that HODLers had nothing to do with this event.
In this context: Bitcoin slump to $ 43,000 due to a strong US dollar and correlation to gold
According to on-chain monitoring website Whalemap, large volume new investors are behind the great selling pressure.
“So yesterday there was a sell-off. The movement was huge and large volumes of Bitcoin were being sold in the spot markets, according to researchers Twitter declared. They also showed a chart that shows where they got their BTC from.
“But who sold it? They weren’t HODLers. Most of them were whales and those who only recently bought their BTC.”
However, analyst William Clemente believes this slump was a welcome rebound for the overheated derivatives markets.
“Investor activity is growing and speculators with high levers have been screened out. That makes for a healthy purge,” he says finally remarked.