During the weekend, the price of Bitcoin fell below $100,000 for the first time in a month and a half.
Why did it go down?
On the surface, the reasons seem simple, but in reality, yesterday the crypto markets made an overvaluation mistake, so much so that today it has already returned well above that threshold.
Why the price of Bitcoin has fallen
On Friday the price of Bitcoin was around $105,000, in an area of perfect normality.
At a certain point, however, it had timidly started to rise, but without going much above $106,500. It seemed like it wanted to interrupt the perfect normality with an ascent, but shortly after it started to fall.
Probably it was too early to climb back to $107,000, and that failed attempt triggered a bit of fear that led to an increase in selling pressure, and a drop in price below $103,500.
Until Saturday, the situation seemed to be quite calm, but at a certain point, hypotheses began to circulate about a possible direct intervention by the USA in the war between Israel and Iran.
The small crash
With the traditional stock exchanges closed for the weekend, only the crypto markets reacted to the spread of those hypotheses, with the price of Bitcoin initially dropping to $101,000.
As soon as the news of the US bombing of Iranian nuclear sites began to circulate, the selling pressure on BTC skyrocketed, triggering two forced liquidations of leveraged long positions in sequence.
The first wave of forced liquidations brought the price to $100,000, and the second, less than an hour later, brought it below $99,000.
To tell the truth, there was also a third one, four hours later, which, however, did not bring the price below $98,000.
The failure to break the support at $98,000, and the end of the sequence of forced liquidation sell-offs, produced a small rebound thanks to which the price of BTC had returned above $99,000, then the traditional exchanges reopened.
The error of the crypto markets
Yesterday, after the markets closed, the hypothesis had spread that the entry into the war by the USA in support of Israel, and against Iran, would trigger such fear in the markets as to induce strong capital movements towards risk-off assets, such as gold or the US dollar itself.
The greatest fear occurred when the Parliament of Iran spoke in favor of the Strait of Hormuz, which is the outlet of the Persian Gulf into the Indian Ocean.
The problem is that 20% of the world’s crude oil passes through that strait, and its closure could have created an oil shock.
All this has led crypto investors to consider a strong increase in the Dollar Index (DXY) possible at the reopening of traditional markets, and since the price of Bitcoin is inversely correlated with the performance of the Dollar Index in the medium term, they thought that BTC was destined to fall below $100,000.
However, already yesterday it was noticed that Iran’s threats regarding the closure of the Strait of Hormuz seemed to be more propagandistic than concrete, also because about half of the crude oil that passes through that strait is headed to China, and certainly Iran in this situation cannot also antagonize the Asian giant.
In fact, last night, at the reopening of traditional exchanges, DXY rose slightly, just climbing above 99 points, and at that point, the crypto markets had to acknowledge they were wrong. It should be noted that during the weekend, it is mainly the retail investors who are active, and retail speculators often make mistakes because they act primarily based on emotions, rather than rationality.
The small rebound of Bitcoin (BTC)
As soon as the traditional exchanges reopened, the price of Bitcoin immediately returned above $100,000, and subsequently rose above $101,000, aiming for $102,000.
This is still a level below $104,000 from Friday, but not by much.
It should be noted, however, that a bit of residual fear in the crypto markets has remained.
This is highlighted very well by the altcoin season index of CMC, which has returned to very low levels.
When things go wrong in the crypto markets, there is primarily an exodus from altcoins, while Bitcoin tends to withstand the impact much better. This causes the altseason index to plummet and highlights that fear still dominates the crypto markets at this moment, even though it is concentrated on altcoins.
To tell the truth, a bit of fear is also present in the Bitcoin market, but at the current state, it seems really insignificant. It should not be forgotten that the current price level is still only at -9% from the all-time highs of last month.
