Bitcoin prices revisits much lower levels for the first time since February 2021, dragging the entire crypto market
Almost all coin prices seem to be in the red zone and falling. The price drops of these coins seem drastic, but given the high volatility of crypto assets, this is not surprising. Bitcoin price dropped to a three-and-a-half-month low on Wednesday. While no one exact reason can be summed up and blamed upon as there are multiple culprits.
Earlier today, in the May 19 trading session, Bitcoin (BTC) eventually bounced at $30,000 for the first time. Liquidations of $3.5 billion occurred, which may have worsened the movement, but they can’t be blamed entirely for it.
China barred financial payment institutions from offering cryptocurrency services earlier on May 19. Elon Musk’s comments about Bitcoin mining coal use also are likely to have played a part. Tether Holdings Limited, on the other hand, had until May 19 to send a breakdown of Tether’s (USDT) reserves to the Office of the New York Attorney General. Regulators’ worries about the cryptocurrency market were highlighted earlier this month when US Treasury Secretary Janet Yellen and Securities and Exchange Commission Chair Gary Gensler shared their concerns.
A look at the technicals :
The combination of these bearish factors resulted in a 50% correction in the last nine days, with the effect on futures markets finally showing strong signs of exhaustion. The price differential between futures markets and standard spot exchanges can be used to better understand how the price movement has affected skilled traders.
The three-month futures should typically trade with an annualised premium of 8% to 15%, which is equivalent to the stablecoin lending rate. Sellers claim a higher price by delaying payment, resulting in the price gap.
The indicator has remained above 8% for the past few weeks, indicating optimism. However, during the May 19 drop to $30,000, the situation dramatically changed as a backwardation occurred for the first time in a year. The futures markets are currently trading below the normal spot exchange rates, which is a very worrying situation.
Since the futures premium quickly reestablished a healthy 7% amount, one could infer that the price drop to $30,000 was triggered by stop loss and liquidation orders.
As of writing bitcoin was trading at $39,579.79.