In less than six days, the bitcoin price has declined from around $8,239 to $6,510 at its lowest point of the week. Despite the steep drop, the possibility of a further pullback is being considered by investors.
Michael Novogratz, for instance, the billionaire CEO of Galaxy Digital, said that the bitcoin price is likely to remain in the $6,000 to $7,400 range for a while unless the dominant cryptocurrency shows a strong recovery in the short term.
“BTC chart needs to recover $7,500 in next two days or we will be in a $6k-$7,400 range which would be less than pleasant. BTC still up 95% on the year to keep perspective, but man, I liked it better above $10k,” Novogratz said.
According to Dovey Wan, a founding partner at Primitive Crypto, the sell pressure in the cryptocurrency market has been building up since last month, and much of the pressure has been coming from spot exchanges.
In an interview, Wan stated:
“The sell pressure already started since last month. It is not just today or like yesterday. So the sell pressure has been ongoing for a while. One thing I realized is that this time, the sell pressure is not coming from like margin exchanges like BitMEX or Deribit. It’s all coming from spot. It’s coming from Huobi and Binance. Which means people are actually selling bitcoin.”
Short term price movements in the cryptocurrency market, especially with bitcoin and Ethereum, are significantly affected margin trading platforms.
Often, strong downside or upside movements in the global bitcoin market are caused by a cascade of long or short contract liquidations. Amidst a $500 to $1,000 move for bitcoin to either side, hundreds of millions of dollars worth of short or long contracts usually get liquidated on BitMEX.
However, the bitcoin price has shown an extended correction since October 26, when it briefly spiked to $10,600.
Bitcoin saw a relief rally to nearly $7,400 on November 25 but has since retraced to the low $7,100 region, with no major reaction to the sell-off.
Throughout the past week, the decline in the price of bitcoin has been mainly attributed to the crackdown of cryptocurrency-related businesses by China.
While the tightening of measures by the government of China could have affected the price movement of bitcoin, larger factors are considered to be the sell-off of cryptocurrencies by regular investors on spot exchanges, and possibly, a sell-off by small miners.
When the price of bitcoin was hovering at around $8,100, a miner reportedly sold $17 million worth of bitcoin on spot exchanges, fueling the sell pressure in the market.