Bitcoin (BTC) Pulls Recovery Rally After Flash Crash
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Bitcoin (BTC) is attempting a recovery rally on Tuesday, after dipping under the $30,000 range. BTC price moves have kept traders fearful for weeks now, with more crashes possible on top of the worsened sentiment.
BTC traded at $30,860.22 on even thinner volumes of $21B in the past 24 hours. BTC recovered by nearly 4% from Monday’s levels. There is still no consensus on whether BTC is safely out of the downward trend.
Flash Crash Complicates Trading
During periods of increasing volatility, exchange trading engines may face a challenge. Even with a less leveraged futures market and subdued trading, there may be trading anomalies. Liquidations and the filling of market orders may expand into a dramatic flash crash.
During the sell-off on Monday, a flash crash happened again on the /exchanges/okex/OKEx exchange in the BTC/USDT pairing. Flash crashes like that are rare, but have happened before during periods of highly active trading. This time, the crash swept up all orders down to $8,000, before the price recovered again to its current levels.
OKEx also faced a similar trading glitch in March 2021 at the most recent. Flash crashes have also happened for ETH traders.
Can BTC Still Crash Lower
There are some expectations BTC will move between the $20,000 and $30,000 range in the event of more flash crashes and capitulations. Extreme predictions see the coin dipping to $18,000.
In the longer term, the crash may be followed by a recovery and potential new highs.
BTC predictions are unreliable, and may depend on short-term conditions and sentiment for some of the price moves.
BTC volatility has also returned in the past year, as the index stood at a low of 1.29% in the summer of 2020. The past two months saw volatility increase to nearly 4.3%, with significantly dramatic price moves during sell-offs and the occasional rapid recovery.
Bitcoin Mining Recovers Slowly
The current market stagnation coincides with a gradual recovery of the Bitcoin network. After mining activity peaked on May 16, 2021 at more than 176 EH/s, the rate dipped to a low of 88 EH/s.
In the past month, mining has grown once again, to levels above 100 EH/s. The newly minted coins are once again sitting in waiting for a better price, based on recent on-chain statistics.
Mining remains profitable even at a lowered price range, and may continue to grow as Chinese miners are replaced by new mining farms, or find new venues.
Retail Buying Mops Up Coins
The recent price slides put a stop on corporate buyers, with no news of MicroStrategy expanding its holdings.
At the same time, data shows an accumulation of smaller wallets with under one BTC.
At the same time, on-chain activity remains low and fewer coins are moved on-chain. In the short term, however, coins are flowing into spot exchanges, potentially increasing selling pressure.
The current price level around $30,000 may be a spot for new accumulation, as some of the “whale” selling may have happened while BTC made its trek to $64,000.
Will Holders Survive the Shakedown
The intention of BTC is to wait out some of the highly volatile periods of loss, while expecting the market price to expand in the longer term with wider adoption.
During the two-month price slide, a significant number of buyers have not absorbed their loss, sitting on significant unrealized losses.
The current market price also puts an unrealized loss on the purchases of Tesla, Inc. and MicroStrategy, which acquired the BTC at higher prices. Yet the next question is whether the recent price slide will present buying opportunities. For now, there is a trend showing that buyers are still available to mop up the BTC available on exchanges.
While BTC may fluctuate in the short term, there are still indicators of coins being held tight with little intention of selling.
The Grayscale shares unlocked led to some retail selling on the OTC market. The GBTC shares trade at the equivalent of $28,080 per coin, lagging the spot market.
Will DeFi Survive
While Bitcoin takes center stage, the cryptocurrency space is also looking out for DeFi, one of its fastest growing branches. With ETH prices still above $1,800, the space is in a better condition compared to the summer of 2020.
DeFi tokens are also one of the fastest to recover, gaining above 10% in the past day. DeFi protocols offer potentially faster gains while BTC prices stagnate. The tokens of some of the largest protocols are regaining their positions.
At the same time, DeFi tokens lost about 25% of their market cap, valuing the whole sector at around $66B, down from $88B a few weeks ago. At their peak, DeFi tokens had a collective notional value above $123B.
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