Bitcoin and the broader cryptocurrency market hit at the end of April 22, and as a result of heavy selling (BTC), the price of BTC fell below $ 48,000, which was a relief for quantitative analysts like PlanB who were worried about signs of inflation. be inorganic.
A number of factors have been identified as the cause of the fall in prices, including a crowded futures market and an active sale of small and medium sized whales. In addition to the activity of the whale in the cryptocurrency market, the most influential event was the proposal by the administration of US President Joe Biden to increase the capital gains tax for individuals who earn more than $ 1 million a year.
Data from Cointelegraph Markets and TradingView show that the massive sell-off triggered a break below the $ 50,000 support level for Bitcoin on April 23, bringing the price down to $ 47,500 before a few daring buyers took it back more than $ 49,000. Dollar.
4-hour BTC / USDT chart. Source: TradingView
A dip below $ 50,000 signifies a 25% decline from the constant high, and bitcoin is now trading at levels last seen in early March.
Bitcoin inflow ahead of the stock market plunge
When asked about the price movement on April 22, Mika Spruel, Managing Partner and Chief Investment Officer of S2F Capital, noted that the sale “appears to be an attempt to stabilize the price below the key level of $ 50,000 as a large number of selling options. “”.
Spruel noted that “the decline in net flow from bitcoin conversions to exchanges” was a potential catalyst that “brought us to the next support level in the chain around $ 47,500,” and also highlighted the fact that “most currencies moved along the chain. at the time of the last sale was made “. There are coins in recent times, not for years.” ”
Net transfer of bitcoins to and from exchanges. Source: Glassnode, S2F Capital
According to Elie Le Rest, partner of ExoAlpha Digital Asset Management, maintaining the current price level “will confirm the institutional investor accumulation model at $ 50,000 or less and allow bitcoin to grow in weeks / months.” Coming. ”
If the price continues to fall, Le Rest has identified $ 43,000 as the next strong support, highlighting the fact that altcoins actually started booming the last time Bitcoin traded in this area in February.
Le Rest said that “a return to this level could lead to a sharp downturn in the altcoin market as they could lose all of their recent gains,” which could bring bitcoin dominance back above 60%.
Le Rest sa:
“In any case, this type of market downturn is very beneficial because it helps eliminate market participants and lays the foundation for more stable growth.”
Traders rush to the exits
To better understand the meteoric selling of bitcoin, Jarvis Labs co-founder Ben Lilly used an analogy suggesting that sellers behaved like passengers on a boat, describing what happened as “automatic syncing.”
“When the boat starts to tip over, a few people are the first to tip over. The higher the slope, the more inclined people are. So bam, there are clues … ”
Lilly pointed to several opportunities that traders have used to monetize this downturn, including the “euphoria of selling alternative currencies,” and the use of carry futures trading. He also highlighted the fact that in these cases the capital was used to sell and not buy.
As an indication of how quickly the market sold out and how much it surprised even institutional traders, analyst firm Whalemap posted the following tweet highlighting the importance of the $ 55,000 level.