Today, there are no positive news for Bitcoin. Although the situation cannot actually be entirely defined as negative, there is indeed a piece of news that in the short term should be considered as such.
In short, the overall and fundamental picture remains absolutely positive, but at least in the short term, there are some clouds on the horizon.
Summary
Why did the price of Bitcoin drop yesterday?
Initially, the price of BTC had moved back above $116,000, but most likely that was just a temporary spike due to forced liquidations of leveraged short positions.
In reality, it was oscillating around $115,000, but at a certain point, something happened that caused it to suddenly drop first below $114,000, and then even below $113,000.
These are not particularly significant movements, also because today it then recovered the level of $113,000, which is in line with yesterday’s low before the rise above $116,000, and is also in line with Sunday’s values.
Yesterday’s decline was characterized by three key moments.
The first was the trigger, which brought it below $114,500.
The second was the first phase of forced liquidation of leveraged long positions, which brought it below $114,000.
At that point, it seemed to have repositioned above $113,500, but then a new phase of forced liquidations of leveraged long positions triggered, bringing it in a very short time below $111,300.
Once the phases characterized by forced liquidations were completed, the decline ended and a small rebound occurred, with a return above $113,000.
The Cause of Cascade Liquidations
Net of forced liquidations, which trigger automatically when the price rises or falls too quickly causing them to trigger, the key to fully understanding what happened yesterday is the trigger.
The point seems to be yet another rise in the American stock indices.
In fact, all three of the latest daily trading sessions ended with new all-time highs for the S&P500, the Nasdaq, and the Dow Jones.
This dynamic might have drained liquidity from other markets, particularly non-equity ones, and the small migration of liquidity from Bitcoin to equities might have been the cause that triggered yesterday’s drop in the price of BTC.
It should be noted, however, that the rise of the US stock indices over the last three sessions has all the characteristics of a mini-bubble, and if it indeed is, it should burst sooner or later.
Bitcoin (BTC) Price Predictions
Although it is already possible to predict that this mini-bubble will eventually burst sooner or later, it is not known when it will happen, nor especially how much further the US stock indices must rise before it bursts.
It should be noted, however, that mini-speculative bubbles are not true bubbles, but brief temporary periods of unjustified rise that soon end, merely bringing everything back to where it started.
Until Thursday 23, there was no trace of speculative bubbles or mini-bubbles in the American stock markets, so in the event of a burst, the indices might only return more or less to the levels of seven days ago.
It remains impossible to predict when this might occur.
To all this, it should be added that there are signals indicating the possibility of a further decline in the price of Bitcoin in the short term.
To tell the truth, the fundamentals of BTC remain very solid, so much so that its price continues to show signs of strength, but this primarily impacts the medium or at most the medium-short term. In the short term, however, the ephemeral purely speculative forces might prevail, precisely those that could have the power to further drive down the price of Bitcoin in the short period.
However, after last week a mini speculative bubble burst on gold, in the hypothetical case that this week the mini speculative bubble on US stocks also bursts, Bitcoin’s reaction could be positive, because a counter-migration of liquidity could occur, this time from stocks to Bitcoin.