Understanding Bitcoin’s Sudden Price Decline
To everyone trying to digest the current digital asset market dynamics, and figure out what may have contributed to the sudden drop in bitcoin’s price….we understand where you are coming from! See below for a few key highlights that can help better explain the current bitcoin price swings. #HODL
Over the weekend, Bitcoin’s price saw a sharp decline to approximately $42,000 and the overall cryptocurrency market declined. Bitcoin’s price started to decline after Elon Musk indicated that Tesla would no longer accept Bitcoin as payment for its electric vehicles over concerns about the negative environmental implications of Bitcoin mining.
Tesla accepting Bitcoin as payment was seen as a major step forward for the cryptocurrency market, so the reversal came as a shock to many investors and Bitcoin supporters.
Elon Musk and Tesla were both perceived as bullish signals for the Bitcoin community and cryptocurrency as a whole. This led to the statement above being perceived as the opposite and may have caused some volatility in the market.
After the Bitcoin price started to fall, a total of $2.4 billion worth of long positions in Bitcoin was liquidated in a 24 hour period along with a total of $441.5 million in short positions. Previously, a total of $1.16 billion of longs were liquidated over the last 12 years. These types of cascading liquidations can cause sudden dips in the price of Bitcoin like a domino effect.
Due to the sell-off of that magnitude occurring over such a short period of time (24 hours), the Bitcoin price crashed further.
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