Bitcoin (BTC) Slides Under $46,000, Losing Support
Bitcoin (BTC) remains volatile, as it erased some of the gains from last weekend. BTC failed to cross the $50,000 barrier and instead slid to the $45,700 tier. In the past two months, BTC trades with relatively smaller volatility, though still going through major crashes and liquidations.
BTC fell to $45,710.43 on Monday, dragging down ETH prices as well to the $3,200 range. Most altcoins also erased their recent gains. BTC prices fell off a cliff during late Asian trading, crashing from above $47,000, as trading volumes reached $30B in the past 24 hours.
What Caused BTC Liquidations
The recent bout of liquidations was much lower in comparison to the September 6 crash. The last 24 hours saw an uptick in liquidations to the highest level in one week. More than $227.9M were liquidated, a relatively small-scale event compared to major liquidations of a few billion USD equivalent.
The relatively low level of liquidations, affecting both short and long positions, suggest BTC may expect renewed price volatility, with even more notable liquidation events. While the BTC market remains less leveraged in comparison to the levels from May 2021, there are still opportunities to attack those positions.
Rapid liquidations are also affecting the ETH market, with the potential to spread further to the entire decentralized finance ecosystem and affect all token prices.
China Trading Fears Affect BTC
One of the reasons for the drop of BTC was the need to sell some of the coins to cover margin calls.
The Evergrande construction company in China is also sending ripples across stock markets. One of the possibilities is that the dramatic event is also causing short-term effects on the cryptocurrency market.
The potential turmoil from the Evergrande unraveling may also affect BTC in the opposite direction, if the asset can provide growth during a stock market crash.
Can BTC Continue Crashing
One of the possible scenarios for BTC is a deeper crash to the $20,000 level, with additional liquidations along the way.
A possible price pressure is a panic event that sends prices tumbling under the $30,000 range.
Other traders remain confident BTC can continue its current path, especially if prices hold above $44,000. One possible cause of price crashes may be the attempt to liquidate short positions at different price ranges.
As BTC enters the final quarter of 2021, the price direction will show if the expectation for a six-digit price is possible. The September close remains important as an indicator for the last quarter price action.
The coming week will also put pressure on BTC with the approaching expiry of CME futures on September 27. The price instability has led to a cautionary trading sentiment, with the Bitcoin fear and greed index set to “neutral” at 50 points.
Mining Gives Hope for Future Growth
Bitcoin mining currently paints a rosier picture compared to the volatile futures market. The network hashrate grows relentlessly over the past two months, and is now above 146 EH/s, on track to recover the levels from May 2021.
Miners are also holding onto their block rewards, which have dropped to only 6.25 BTC per block, or around 900 coins in a 24-hour period. Some of the coins are still sent to exchanges, but there are renewed signs of accumulation.
The reluctance to sell newly-minted coins is also driving the scarcity of spot BTC on exchanges.
Lightning Network Doubles Capacity
The Lightning Network, one of the scaling solutions for BTC, has significantly grown its capacity. As the network has proven its reliability, more BTC has been deposited to its nodes.
The Lightning Network held around 1,000 BTC in July. By September, the funds stored within nodes and available to send through channels have grown by leaps.
The Lightning Network is now on track to hold 2,400 BTC.
The Lightning Network is still considered experimental, and its nodes and payment channels have taken years to build up reputation as a safe spot to hold BTC. So far, the network has reported only very small losses of funds.
BTC Holding Behavior Prevails
Despite the repeated volatility on the futures markets, spot BTC is showing a prevalence of holding behavior. The short-term dips ahead of the weekend found immediate buyers, as noted by on-chain data.
One of the signs of long-term confidence is the decision of El Salvador to add to its coin reserves during the latest price dip. The country’s president, Nayib Bukele, remains one of the staunch supporters of using BTC for everyday payments as legal tender.
While the country’s coin stash is still relatively small, it is considered one of the signs for BTC adoption and a challenge to using fiat.
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