The Bitcoin (BTC) market has been significantly disturbed over the last 24 hours following a series of troubling news reports. During this period, the crypto market leader has recorded notable downfalls with its price slipping below the $66,000 price mark. However, a crypto analyst with X username Luca has postulated this recent price decline can be attributed to another factor beyond the news events.
On Friday, the Wall Street Journal reported that Tether was under investigation by US authorities over potential illicit use of the USDT stablecoin in money laundering, drug trafficking, and terrorism among other crimes.
Such a damaging report on USDT which ranks as the largest stablecoin appeared to induce a bearish sentiment in the crypto market which caused BTC to fall to around $66,000 prior to a refuting statement by Tether’s management. While in partial recovery, reports of an Israeli attack on Iran also ignited another downtrend forcing Bitcoin to reach a local bottom of $65,700. Overall, BTC’s dropped by 4% from around $68,602 on Friday.
However, in an X post on Saturday, Luca states that the price decline was caused by a high Open Interest rather than the supposed news events. The crypto analyst explains that amidst Bitcoin’s downtrend, Open Interest also dropped by 9% indicating the market was highly overleveraged.
According to Luca, BTC’s recent rally from $59,000 on October 10th to $69,000 on October 21st was driven by Perpetual contracts with little to no spot investment. Thus, the rally was always temporary with significant liquidations and price reversal a certainty.
In regards to the high Open Interest in Bitcoin, Luca also states that the Liquidation Heatmap has shown significant liquidations to occur at purported support zones as these positions are highly overleveraged.
Following the recent price drop, the analyst highlights that $65,000, which represents a major support level, is one of these highly overleveraged zones with several long positions. Luca believes the Bitcoin bulls will lose this support zone if a retest occurs and BTC is likely to fall to $60,000 which may now hold as an effective support level.
At the time of writing, Bitcoin continues to trade at $67,001 with a 0.50% gain in the last day. Meanwhile, the asset’s daily trading volume is down by 28.23% and valued at $26.93 billion. With a market cap of $1.32 trillion, Bitcoin remains the largest digital asset in the world.
Featured image from Kinesis Money, chart from Tradingview
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