Who was it That was Selling? Not HODLers’ — New Data Points to a ‘Culprit’ in the Bitcoin Fall, Which Coincides With a Leverage Wipe-out

The difference between this week’s Bitcoin price drop and the coronavirus crash of March 2020 is a typical contrast between hodlers and leveraged traders.

According to one analyst, Bitcoin (BTC) dropped by $9,000 in hours on Tuesday due to a major unwinding of leveraged traders and borrowers.

Willy Woo attempted to get to the bottom of what caused BTC/USD to plummet to lows of $42,800 on Tuesday in a series of tweets on Wednesday.

Woo: Bitcoin margin borrowers and open interest may be to blame

With rumors flying over who was behind Bitcoin’s major price dip, analysts have been crunching data in order to understand where the rout began.

Analogies to the March 2020 crash, sparked by coronavirus measures, abound, but Tuesday’s event showed major differences, Woo said.

“Leverage markets sold off but investor buying just got stronger,” he summarized.

“BTC flash crashes are caused by deleveraging, the COVID crash was similar in that derivatives overreacted, but back then it was supported by investors. This one was completely divergent and a mystery. Cheap coins.”

Woo subsequently suspected that the dip came as a result of 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.

“Healthy cleansing”

While the procedures involved may appear complex to the casual observer, the strength of Bitcoin’s recovery and continuous investor buy-ins indicate that the event was not caused by cold feet among hodlers.

According to on-chain monitoring resource Whalemap, large-volume investors who were newcomers to the market provided the vast majority of sell-side pressure.

“So yesterday we had a sell off. The move was quite violent and large volumes of Bitcoin were being sold off on spot markets, researchers tweeted alongside a chart showing where those parties had acquired BTC.

“But who was selling? Not HODLers. Mostly whales and in fact the ones that bought their btc only quite recently.”

Image Source: CoinTelegraph

For fellow analyst William Clemente, meanwhile, Tuesday provided a welcome reset of frothy derivatives markets.

“Investor activity strengthening + Leveraged speculators wiped = healthy cleansing,” he concluded alongside Woo’s findings.

Source: CoinTelegraph

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