The price of the most dominant coin Bitcoin plummeted to $8,600 by 14% in only 15 minutes today – going from $10,180 to $8,600 on BitMEX in a very short timeframe. Traders following the cryptonews were scared of a new major reversal but the good news was that BTC managed to retrace.
Now, there are plenty of discussions on crypto Twitter and other platforms that are investigating the sudden drop and the main reasons behind it. Speaking of, the three major factors which caused the drop were:
- The long contracts accounting for the overwhelming majority of the Bitcoin market
- BTC reacting to its multiyear resistance at $10,500
- Whales dumping their BTC holdings
The drop is also visible on the chart below, showing how Bitcoin plummeted to $8,600 in only 15 minutes.
Now, we are back at step 1 where we can see how Bitcoin is again attempting to breach the $9,500 levels and then head to $10,000 for a new surge. The bad news is that there is very weak momentum above the $10,000 margin, which proves that BTC needs all the strength it can garner to overcome it.
The term funding rate in the Bitcoin futures market hovered at around 0.16% and 0.19% during the drop. But why is this important?
Well, this means that the fee long contract or short contract holders have to pay their counterparts to establish balance in the market. If the Bitcoin price is going up and the funding rate rises, this mechanism prevents the market from swaying to majority longs or shorts for an extended period of time.
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Even the analysts on crypto Twitter are featured in the Bitcoin news now – PlanB is one of them for his tweet today which shows a similar coincidence to the May 20 and May 21 drops.
https://twitter.com/100trillionUSD/status/1267835341987340288?s=20
As a reminder, this is the third time the dominant coin BTC has tested the same level in the last three quarters and the third time it has been met with a similar reaction. As the coin fails to reclaim the same level for three consecutive times, the question that traders are asking is whether the coin is ready to break out of it and start a proper bull trend in the coming weeks.
As Bitcoin plummeted to $8,600, other altcoins were also affected and most of the market is still in red.
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