In the past 24 hours, the Bitcoin (BTC) market has experienced significant turbulence due to a series of concerning news updates. During this timeframe, the leading cryptocurrency has seen its price drop below the $66,000 threshold. However, an analyst known as Luca on X has suggested that the recent downturn might be linked to a factor other than the news itself.
Analyst Attributes Bitcoin Decline to Overleveraged Market Rather than News
On Friday, the Wall Street Journal reported that Tether is facing scrutiny from US authorities over potential illegal activities involving the USDT stablecoin, including money laundering, drug trafficking, and terrorism, among other allegations.
This damaging news regarding USDT, the largest stablecoin, seemed to create a bearish sentiment in the crypto market, leading to BTC’s decline to approximately $66,000, prior to a denial from Tether’s management. Despite a partial recovery, news of an Israeli attack on Iran prompted another decline, causing Bitcoin to hit a local low of $65,700. Overall, BTC has fallen by 4% from around $68,602 on Friday.
However, in a post on X on Saturday, Luca claims that the decrease in price was primarily due to elevated Open Interest rather than the reported news events. The analyst elaborates that while Bitcoin was declining, Open Interest also dipped by 9%, suggesting that the market was excessively overleveraged.
Luca notes that BTC’s recent surge from $59,000 on October 10th to $69,000 on October 21st was fueled by Perpetual contracts rather than significant spot investments. Thus, this rally was likely to be short-lived, making liquidations and a price reversal inevitable.
Could BTC Drop to $60,000?
Regarding the high Open Interest in Bitcoin, Luca also points out that the Liquidation Heatmap indicates that considerable liquidations are expected at supposed support levels, as these positions are substantially overleveraged.
In light of the recent price decline, the analyst mentions that $65,000, a critical support level, is one of these zones with excessive long positions. Luca anticipates that if a retest occurs, Bitcoin bulls may lose this support level, causing BTC to potentially drop to $60,000, which might then serve as a new effective support level.
As of now, Bitcoin is trading at $67,001, reflecting a 0.50% increase in the past day. Meanwhile, the asset’s daily trading volume has decreased by 28.23%, amounting to $26.93 billion. With a market capitalization of $1.32 trillion, Bitcoin remains the most significant digital asset globally.
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