After seeing some relief over the weekend, bitcoin is back above $20,000. The number one crypto by market capitalization fell below its 2017 all-time high as selling pressure increased, driven by the current macro-economic environment.
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At the time of writing, Bitcoin (BTC) is trading at $20,500 with a gain of 6% over the past 24 hours. A different story has been recorded with a loss of 24% in the last seven days.
Arthur Hayes, former CEO of BitMEX claims An institutional forced seller triggered an increase in selling pressure. An entity that was forced to liquidate its position as BTC price moved further downward.
Hayes believes that Canada’s Bitcoin Purpose Exchange Traded Fund (ETF) was potentially responsible for the downward price action. The investment vehicle is dictated by physical BTC and, as intended, when a client buys an ETF, they are buying “real bitcoin”.
The former CEO of BitMEX claimed that he was unfamiliar with the redemption process of this ETF. However, as seen below, the investment vehicle has dumped 24,500 BTC into the market.
This represents about 50% of the ETF’s assets, so if BTC was sold hastily, it seems logical that bitcoin would have lost support around $20,000 and was forced to trade less with the rest of the crypto market. . Buyers show up and absorb the price action below.
This enabled bitcoin to retest the $20,000 area and showed that bitcoin quickly bounced back from these levels. Hayes said the following about the conditions that drove the BTC price to new lows, and why it felt relieved:
Over the weekend, while the fiat rail closed, $BTC fell in decent amounts to a low of $17,600, down almost 20% from Friday. Smells like a forced salesperson triggers a run-on stop. After sellers dumped their bags, the market rallied in small quantities.
Why bitcoin could see more pain
The initial reaction to downside pressure was good, but as Hayes explained, it happened during the low weekend and with little volume on the exchange platform. The crypto market could see the price of BTC taking another swing lower. The former CEO said:
Given the poor risk management conditions and lenient lending terms by crypto lenders, expect more pockets of forcible selling of $BTC and $ETH as the market figures out who is swimming naked.
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As this structure, which contributed to the spike in selling pressure, remains intact, the bears may continue to push BC price down. In the meantime, longer-term players have an opportunity to increase their holdings, Hayes concluded:
Is it over now… I don’t know. But for those skilled knife catchers, there may be additional opportunities to buy coins from people who must kill every bid, no matter the price.