Here we are , the 2nd June 2020 and the BTC price wend down from $10, 180 to $8,600 in one single hourly candle, in fact the whole price movement took only 15 minutes to happen. It was fast and violent as we can often see with the king of cryptocurrencies and all the other coins that are correlated to in.
First of all , all of our signals this past period were wins, and i truly hope you guys respected the suggested stop-losses in our signals. We are now evaluating the situation and will post new cryptocurrency trade signals as soon as we see a good opportunity.
Now, back to the main issue of why this bitcoin plummet happened.
The multi year resistance
Bitcoin has tested this resistance at $10,500 three times over the last year, and this is no exception, the price has rejected.
As BTC fails to pass over the same level for three consecutive times, the question that matters now for traders is whether bitcoin is ready to break out or are we going to continue further down.
Bitcoin was overdue for a long squeeze
Now let’s have a look at some simple stats. Take the funding rate for futures exchanges like bitmex for exemple. Before the drop BTC and ETH funding rates were at 0.16% and 0.19%. This is far from the 0.01% that means almost perfect equilibrium between the SELL and the BUY orders.
The definition of funding rates in short: The funding rate is a fee that a long or short contract holder must pay to their counterparts in order to maintain a balance in the market. When the fee is negative SHORTS pay LONGS and vice versa. This is the way futures markets protect the markets from swinging too much.
How does this influence the recent drop? Well when the funding rate becomes too high in one direction, as it was the case this time, the market was unbalanced to the long side as the majority of traders were anticipating Bitcoin’s price to go even higher and were engaged in aggressive long positions.
OVER $120M worth of long contracts were liquidated today on Bitmex
This is sad for some but it’s part of the game, with proper risk management this is just another day, and i certainly hope you are not one of the liquidated accounts.
A Big whale move to Binance and Bitmex predicted the move
Just a few hours before the Bitcoin drop to $8600, there have been two whale moves registered to Binance and Bitmex
It’s amazing how many parameter a successful trade needs. Usually big whale moves between accounts mean nothing much, but sometimes they offer a unique insight on what’s going to happen. On this part, if you are a client of Sublimetraders crypto signals you are covered. We have implemented big whale moves into our SublimeScanner® since the very beginning, it is one of the parameters that we take into account before posting a crypto trading signal.
The combination of these 3 events have conducted the price drop today, 2nd June 2020.