Bitcoin price drops below $21,000 on this new dose of fear

Bitcoin koers keldert hard door hoge angst, meer volatiliteit opkomst

Bitcoin (BTC) turns red for the first time in two weeks. At the end of yesterday afternoon, fear kicked in again and bitcoin plummeted from $21,500 to $20,400. Subsequently, the price made a small bounce, but failed to recapture $21,000. Still, bitcoin found support around $20,750 last night and very gently rose overnight to the current price of $20,800 on Binance and $19,190 on Bitvavo.

This puts the bitcoin price down 2.2% today. The trading volume increased by 22% in the past 24 hours. The total market capitalization is $401 billion and the dominance is 41.4%. The Fear & Greed Index comes out at 45 (Neutral).

Justice Department caused a good dose of fear

The fact that crypto is volatile and that sentiment can turn quickly became clear again yesterday. Yesterday afternoon, the US Department of Justice suddenly announced that it would be making a major announcement about enforcement against a major crypto exchange. That followed news of further problems at Digital Currency Group (DCG) and Genesis.

The panic immediately set in and almost all prices took a nosedive, many crypto fell by more than 10%. A few hours later, the authority announced that it concerns crypto exchange Bitzlato, a relatively unknown platform. The market reacted with relief and prices immediately bounced. Shortly afterwards, the Russian founder was arrested for laundering $700 million. More on this later on Crypto Insiders.

Fear creates biggest long squeeze since FTX

The decline was accompanied by the largest so-called long squeeze since the FTX crash in early November. A whopping $21 million in bitcoin long positions were liquidated in just an hour, reports On-Chain College.

Not for any reason, anyway; other markets also red

Still, the fear fueled by the US Department of Justice was not the only reason for the red numbers. We also saw other markets fall sharply, the S&P 500 even fell by 2%, the biggest drop in more than a month.

These declines followed somewhat weak economic data in the US that reignited concerns about a possible recession and a hawkish policy of the Federal Reserve.

Bitcoin net inflow or outflow?

Analyst Gaah reports that another significant outflow of bitcoin from exchanges took place yesterday. 5,647 BTC was taken from exchanges, which is usually one bullish sign for the course.

However, analyst IT Tech warns that bitcoin miners are actually sending BTC to exchanges, and that is usually a bearish sign for the course.

Bitcoin analysts are becoming more cautious again

Analysts seem to be becoming more cautious after the positive sentiment of the past few weeks. Analyst Philip Swift reports that the Net Unrealized Profit/Loss (NUPL) is finally out of the capitulation zone. That could mean that the price has reached its bottom and we are starting a new cycle.

However, the poor macroeconomic conditions and the issues surrounding DCG could mean that we will go down again, says Swift.

Analyst Caleb Franzen reports that 21-day exponential moving average (EMA) is now above the 55-day EMA. The last time this happened was in March 2022 and was followed by a big one pullback in April. That does not have to happen again, of course, but it is good to be prepared for this, says the analyst.

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