Bitcoin (BTC) continued to hover near two-month lows during the Wall Street opening on August 18 as the market experienced extreme liquidations. BTC’s price action remained relatively stable after a daily candle caused an 8% loss. This decline in price led to a cascade of liquidations in the derivatives market, with spot selling being relatively slack.
The market reaction to the alleged trigger for the liquidations, a write-down of SpaceX’s $373 million BTC holdings, seemed exaggerated. Many market participants were reminded of previous instances where Elon Musk’s comments had led to tops and bottoms in the Bitcoin market. However, analysts noted that the recent liquidation event surpassed those seen after the FTX exchange meltdown in November 2022, which resulted in BTC/USD hitting two-year lows of $15,600.
The drying liquidity in the market has been a concerning trend in recent weeks. Financial commentary resource The Kobeissi Letter highlighted this issue, stating that the significant liquidations were another sign of the drying liquidity in the markets.
Opinions on the future implications of the situation varied among market participants. Analyst Rekt Capital painted a bleak picture, pointing out a double-top formation for BTC/USD in 2023 and a lack of support from trend lines and moving averages during the breakdown. Rekt Capital warned that the volume of capitulation had likely not yet reached the levels seen in previous sell-offs.
On the other hand, trader CryptoCon expressed optimism, identifying two completed tasks that are typically observed in successful BTC price rebounds during bull market retracements. These tasks involved the relative strength index (RSI) values bouncing at the 0.382 Fibonacci retracement level.
Looking ahead, market observers highlighted Jerome Powell’s speech at the Jackson Hole next week as a potential source of volatility. Powell, the chair of the United States Federal Reserve, could provide insights that may impact the Bitcoin market.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading move carries risks, and readers are advised to conduct their own research.