The blood bath on Crypto Street continued on Wednesday with Bitcoin dropping below the $8,000 mark for the first time since June this year. Yesterday, the price of Bitcoin had dropped sharply from $9,800 to $8,150, losing $1,500 in just 24 hours. While Bitcoin has since recovered slightly and trading close to $8,284, the market movements indicate a massive sell-off by investors.
According to analysts at CoinDesk, a fundamental reason for this sharp drop is margin calls and contract liquidations on Bitmex. The report stated that it was a case of ‘long squeeze’, where investors who held long positions felt the need to sell into a falling market to cut their losses, leading to a further decline in market prices. The sudden price drop is also contrary to expectations after the recent Bakkt launch, which was cited as a positive trigger for Bitcoin.
Technical indicators suggest that further short-term pain is likely in the offing for investors. An immediate support is near the $8,400 level, below which the price of Bitcoin could test $8,250. If the bearish sentiment continues, there is a chance of the price breaking the $8,000 barrier again and moving towards the next major support level of $7,500.
However, there is no reason for long-term hodlers to panic at these levels. Cryptocurrency is a volatile asset class, and such price actions are simply a characteristic of the market.