Bitcoin’s
price
has
fallen
below
the
critical
support
level
of
$60,000,
reaching
a
low
of
$57,914.
Since
Tuesday,
Bitcoin
has
experienced
a
further
7%
decline,
reinforcing
the
ongoing
downward
trend.
Currently,
market
sentiment
is
shifting
markedly
towards
the
bearish
side.

Is
A
May
2021-Style
Bitcoin
Crash
Looming?

Andrew
Kang,
co-founder
of
Mechanism
Capital,
has

raised
significant
concerns
regarding
the
pattern
emerging
in
the
Bitcoin
market,
reminiscent
of
the
conditions
that
led
to
the
dramatic
crash
of
May
2021.
In
a
detailed
analysis
shared
via
X
(formerly
Twitter),
Kang
highlighted
the
overlooked
criticality
of
the
current
market
dynamics.

 

Kang
stated,
“Most
market
participants
are
not
appreciating
the
significance
of
a
potential
loss
of
a
4-month
range
on
Bitcoin.
The
closest
parallel
we
can
draw
is
to
that
of
the
range
of
May
2021
where
we
also
came
off
a
parabolic
rally
of
BTC
and
alts.”

Related
Reading

He
noted
the
similarities
in
market
conditions,
particularly
in
terms
of
leveraged
positions,
which
currently
exceed
$50
billion.
“This
figure
does
not
include
the

Chicago
Mercantile
Exchange
(CME),
which
is
higher,
but
compounded
by
the
fact
that
in
this
scenario
we
have
ranged
even
longer
(18
weeks
vs.
13),
and
we
have
not
had
extreme
washouts
yet
while
we
had
a
few
in
the
middle
of
the
2020-2021
bull
market,”
Kang
elaborated.

Kang
also
adjusted
his
projections
for
Bitcoin’s
bottom,
suggesting
a
steeper
fall
than
earlier
anticipated:
“It’s
likely
that
my
initial
estimates
of
low
$50ks
were
too
conservative
and
we
see
a
more
extreme
reset
to
$40ks.”
He
warned
that
such
a
pullback
could
significantly
damage
the
market,
necessitating
a
few
months
of
consolidation
and
a
downtrend
before
any
reversal
to
an
upward
trend
might
be
conceivable.

 

In
a
dialogue
with
Alex
Krüger,
a
well-known
macro
and
crypto
analyst,
the
discussion
explored
the

intricacies
of
open
interest
(OI)
in
the
derivatives
market,
a
crucial
aspect
of
understanding
market
sentiment
and
directional
biases.
Krüger
pointed
out,
“Much
of
that
OI
is
not
directional
though,”
suggesting
a
more
complex
market
behavior
than
straightforward
long
and
short
positions.

Related
Reading

Responding,
Kang
clarified
the
composition
of
OI,
saying,
“Each
unit
of
OI
is
one
long
+
one
short.
Even
if
there
are
basis
trade
shorts
on
the
short
leg,
there’s
a
directional
long
on
the
other
end.
So
yes…
less
directional
shorts.”
The
conversation
further
delved
into
whether
derivatives
traders
are
delta
neutral,
which
affects
market
stability.

Krüger
queried
about
market
maker
positions,
and
Kang
responded,
“I
can
assure
you
that
there
are
not
many
market
makers
in
the
OI
that
are
delta
neutral
long
perps
and
short
spot
paying
funding/borrow
on
both
ends
for
a
negative
carry
trade.”

What
Happened
In
May
2021?

This
ongoing
discussion
among
experts
reflects
a
deepening
concern
over
the
potential
for
a
repeat
of
the
May
2021
crash.
During
that
period,
Bitcoin’s
price
plummeted
dramatically
following
a
peak
of
around
$64,000
in
mid-April
2021.
By
the
end
of
June,
it
had
lost
about
56%
of
its
value.
This
crash
was
precipitated
by
a
mix
of
factors,
including
regulatory

 

crackdowns
in
China,
environmental
concerns
voiced
by
influential
figures
like

Tesla
CEO
Elon
Musk,
and
a
resulting
cascade
of
panic
selling
among
both
retail
and
institutional
investors.

In
retrospect,
the
May
2021
downturn
was
characterized
by
a
rapid
shift
in
investor
sentiment,
driven
by
external
shocks
and
exacerbated
by
the
high
levels
of
leverage
in
the
market.
Today,
similar
conditions
could
be
forming
according
to
Kang,
with
high
leverage
and
extended
periods
without
significant
price
corrections,
suggesting
that
the
market
may
be
on
the
brink
of
another
severe
downturn.

At
press
time,
BTC
traded
at
$58,736.

Featured
image
created
with
DALL·E,
chart
from
TradingView.com

Go to Source
Author: Jake Simmons

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