$2.53 Bil liquidated as BTC Plunges ~17% in 12 Hours

Featured: Bitcoin, Joe Biden, $2.53 Billion, Crypto Tax Evasion, Black Thursday

Bitcoin after advancing more than 100% since mid-December 2020 and hitting a new price record at $42K plunged ~17% washing away $13 Bil. worth of investors’ wealth. Altcoins felt the pressure and followed their leader which triggered short selling in the crypto market draining away ~20% of the total market capitalization(~192B). In the past 24 hours, positions worth of $2.53 B of approximate 246.6 K traders were liquidated. The largest single liquidation order worth a whopping $22.24 million occurred on BitMEX exchange in the ETH perpetual contract.

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Possible factors for this massive fall

Transactions worth ~$500 million- As per the blockchain scanner, Whale-alert.io, an anonymous trader moved 12,598 BTC, transactions worth of ~$500 million were executed on January 7 as BTC broke away ~$40 K. The transfer took place as three separate transactions with 4,892 bitcoin, followed by 4,360 and 3,400 BTC in the course of 12 hours. The U.S. Treasury has proposed to collect identity data on clients generating crypto transactions over $3,000. Therefore, the movement of funds of this magnitude might be a potential reason for this plunge and has again brought the issue of crypto tax evasion to the limelight.

In/Out of the money Analysis- As per the Blockchain analytics provider intotheblock.com, 2.35 M BTC (~12.6% of circulating supply) were accumulated in the range of $9.5 K to $11.6K, therefore they will be in 3x profit, however, only a minuscule ~0.97% of the total addresses holding BTC (325.29 K) with average buying price ~$40K accounting for ~180.2 K BTC is in the loss. Thus it suggests that profit- booking can be a key factor behind this fall.

Relative Strength Index (RSI)- RSI is a technical momentum indicator used to evaluate whether an asset’s price is in an overbought or oversold condition. RSI values range from 0–100, value above 70 indicates that a security is overbought and may witness a reversal in trend or pullback in price, value below 30 indicates an undervalued condition. In the weekly TF, RSI value has topped at 94.8 whereas, on the flip side, RSI values quoted a high of 88.8 during the 2017 high of BTC. Therefore, it was important for the price to retrace back and cool down for the bull rally to continue further.

Conclusion

The current fall could have been triggered due to liquidations of massive leverage positions similar to Black Thursday event(Mar12, 2020) when Bitcoin’s price plunged by more than 40%. Thus, the current retracement doesn’t mean that whales have started dumping their positions, instead, this sharp correction suggests that the longs have just been liquidated.
With the US President-elect, Joe Biden call for $2,000 “stimulus checks” to Americans that would lead to the weakening of the dollar and rising inflation, coupled with BTC’s liquid supply(~3.9M) with respect to illiquid supply (~14.59 M) as per Glassnode indicates that the current fall in Bitcoin could be a healthy correction and BTC presents itself as a safe-haven asset due to its inherent function of serving as the store of value and inflation hedge.

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