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Bitcoin, the titan of the cryptocurrency world with a market capitalization of around $1.9 trillion, has suffered a significant decline, falling below the psychological threshold of $100,000. This flash dump, which occurred in the span of just three days, has left many investors and analysts wondering whether this marks the end of the current bull market or signals a healthy correction within an ongoing uptrend.
Temporary setback or turnaround?
The price action has been particularly notable this week, with Bitcoin breaking above the $100,000 support level, which had remained strong for eight consecutive days. Market analysts point to several factors contributing to this decline. A significant influence is given by the market makers’ strategy, which involved increasing the price to encourage traders to open long positions at around $98,000, thus increasing liquidity.
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Having exhausted this liquidity, market makers strategically used Federal Reserve Chairman Jerome Powell’s speech as a catalyst to drive a downward price movement, effectively closing price inefficiencies at $93,744 (50%) and $90,513 ( 100%).
The analysts explained: “Bitcoin’s decline was necessary as there were inefficiencies below the price to fill, which is $93,744 for 50% and $90,513 for 100%. The inefficiency rule states that traders have to make up for 50% or 100% of the inefficiency.”
They added that market makers “purposely increased the price to induce traders to open long positions, thereby increasing liquidity to $98,000. Exhausted market makers decided to wipe out liquidity at $98,800 and used Powell’s speech as a catalyst to fuel the move lower.
Experts now expect a bounce to $101,000 before a pullback or trend continuation, as the $93,788-$92,200 range currently serves as solid support. This area has seen significant buy orders, in line with the recently filled 50% gap. A rebound from this level appears inevitable.
BlackRock and Institutional Moves Signal Confidence in Bitcoin
Amid the volatility, BlackRock, one of the world’s leading asset management firms, has made headlines for its large investments in Bitcoin. According to insights from Arkham Intelligence, BlackRock not only bought Bitcoin while other ETFs sold, but also accumulated a considerable amount, now holding 122.6K BTC. This makes BlackRock the 11th largest holder of Bitcoin, controlling about 0.6% of the circulating supply.
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Their aggressive accumulation, including a recent $1.5 billion purchase, stands in stark contrast to the broader market’s net selling of BTC of $785 million this week. BlackRock’s actions have sparked discussion on platforms like X, with many applauding or humorously noting their transition from traditional assets to digital currencies.
Furthermore, BlackRock’s involvement in the cryptocurrency market was highlighted by their BUIDL fund receiving $100 million USDC, signaling a strategic pivot towards digital assets. Such a major financial force could interpret this move as a vote of confidence in the long-term viability of cryptocurrencies, potentially influencing market sentiment and dynamics.
Market sentiment: fear or opportunity?
Current market sentiment, as measured by the Fear and Greed Index, remains in the greed zone at 62, indicating minimal fear among investors. Instead, the drop below $100,000 is seen by many as a buying opportunity, with expectations of an imminent recovery. Analysts expect a rebound towards $101,000 before any significant pullback or continuation of the current trend, supported by robust buying in the $93,788-$92,200 range, which aligns with the recently reached 50% inefficiency level.
Featured image from iStock, chart from Tradingview.com