The fact that Bitcoin fell hard and fast below $86K is not an accident; it was a textbook example of an unwind of macro leverage. The BOJ’s December tightening signals created a perfect storm of events that sent the price spiraling, including USD/JPY stress above 155, global yield repricing and crypto being the most sensitive to leverage. With $700M in liquidated longs over the weekend and a thin order book, it’s anyone's guess what will happen in the future when the crowd becomes invested in the idea of a long position and the central banks become involved.
They key levels moving forward are the following: $86K (the continuation of the upward trend), $83K (the point at which the upward trend failed) and $82.6K (a test of support). The Chaikin money flow on a four-hour chart confirms that the buying pressure has dried up completely. This should not be viewed as a dip to buy but rather a stark reminder that crypto is a risk asset with large potential price swings based on global liquidity.
Risk management rules to keep in mind include: (1) Reduce leverage ahead of a central bank meeting, (2) Don't trust weekend liquidity, and (3) Trade based on the structure rather than a news story about the market.
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