Some hours ago, Bitcoin rose above $10,000 for the first time in six weeks in a move that seems to show a bullish momentum as the $10,000 resistance mark been broken.
However, during the rally, over $100 million worth of Bitcoin short positions were liquidated as Bitcoin plunged by nearly $1,500 in less than 3 minutes, before rebounding to around $9,458. Bitcoin is trading at $9,540 4 am local time.
Bitcoin’s plunge was bad news for the bulls. By falling back below the $10,000 psychological support, it has shown a likely downward trend as investors start to close their positions.
According to data retrieved from crypto derivatives platform, Skew.com, an approximate $96 million worth of long positions were wiped with this lower move. This is lower than the $125 million liquidation event that took place when BTC took out $10,000 yesterday, suggesting that the market was leaning to such a trend.
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Things you need to understand about Bitcoin’s volatility
The price of Bitcoin is so volatile because of its high use for financial gain by investors and crypto traders. As such, individuals and hedge funds sell and buy Bitcoins like they would do for any other financial asset (Stocks, bonds) with regulatory limitations.
One of the key biases touted by Bitcoin bears is that Bitcoin remains below the key resistance of $10,500 and has refused to break that mark since early 2020.
$10,500 is the level at which the bitcoin price was rejected during two crucial rallies over the past 12 months.
The fact that BTC has made successive takes at the level without breaking past it suggests that the crypto market is still situated in a downtrend.
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Robert Sluymer of Fundstrat Global Advisors, for instance, recently commented on the importance of the level. He said:
“Next directional move on tap for BTC’s as bull-bear convictions are about to be tested. Bears can point to the downtrend at 10-10.5K. Bulls have the long-term uptrend (200-week SMA) at their back and the past week’s resilience as BTC’s quickly rebounded from its 200-DMA.”