It hung in the face of investors, this correction. And if the movements of Bitcoin and Ethereum were nothing supernatural on Monday, this day was especially distinguished by historical volatility . This of course caused enormous damage on the side of the leveraged positions, which were liquidated during the flash crash of BTC and ETH .
What was the cause of this correction? Hard to say. There may have been a boost from the decline in Nasdaq tech stocks . There have also been negative comments from the new Secretary of the Treasury, Janet Yellen. Or a tweet from Elon Musk suggesting that the price of Bitcoin is high. But the explanation is probably much simpler. It is simply a technical pullback after an excessively sustained rise. Add to that optimistic, ultra leveraged traders , and you have yesterday’s fireworks display.
However, for Bitcoin this correction should be put into perspective. Even at less than $ 50,000 BTC, we’re back to levels of… a week ago. It remains to be seen, of course, whether Bitcoin will manage to win back the 50,000 and then consolidate beyond this level or continue its correction.
It is not difficult to understand what happens in a downside when trading on margin is overused . The more the price falls, the more positions are liquidated, which leads to a snowball effect. This is how we get a flash crash like the one on Monday. Leverage is a double-edged sword that should be handled with care.
Traders who got caught yesterday are obviously not happy. But from there to threatening Kraken with legal action… When they take advantage of the funnel of a limited supply to make a profit, everything is fine. But when the backwash occurs, suddenly it’s unfair. Just before the crash, the boss of FTX, Sam Bankman-Fried , had rightly warned that the market was ” massively over-raised “.
On Monday, Bitcoin’s daily fluctuations amounted to as high as $ 10,877 . For the first time in its history, Bitcoin’s volatility has reached a 5-digit amount. But what about Ethereum, whose price collapsed from around $ 2,000 to $ 400 and then rebounded just as violently? There is only one way to protect yourself from this: invest without leverage, or with minimal leverage.
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