Bitcoin saw a sharp sell-off on Monday, leaving the asset's one-day performance up more than half of last week's gains.
The world's largest crypto fell 4.8% on the day to over $93,000, bringing Monday's total decline to over $4,800. For context, that's up 55% from last week's $8,100 run.
Still, analysts say the move could be part of traders rebalancing their positions as they look towards the end of the year, particularly towards the end of December, which has proved favorable in the past.
Ryan McMillin, chief investment officer at crypto fund manager Merkle Tree Capital, said: “We see a combination of two incentives temporarily pushing the price of Bitcoin.” Decrypt.
He pointed to a “wall of selling” below the “psychological barrier” of around $100,000, where traders are looking to use mines following President-elect Donald Trump's victory three weeks ago.
McMillin also noted that it's “very challenging” for market makers not to pursue the accumulation of leveraged longs or plays at higher prices.
In other words, market makers who facilitate currency exchanges can deliberately drive prices down to minimize the long periods of those leveraged.
Liquidations rose to $550 million on Monday, 70% of which came from long positions. It follows the same trend Sunday. Still, McMillin says this is part of normal market behavior.
“There's not a lot of liquidity below $92,000, so it looks like a floor for this move,” McMillin said. We expect the market to go and retest $100,000 before the end of the week.
Others agree, with traders saying Monday's move was part of normal market volatility, hedging against potential downside risks in response to recent moves.
“These kinds of recoveries are not common in bull markets,” said Nick Forster, founder of the DeFi Derivatives Protocol. Decrypt. “We're seeing strong structural tailwinds for Bitcoin with favorable conditions such as an interest-rate-cutting cycle and an improved regulatory framework.”
Other cryptos in the top 10 by market capitalization also dipped, with Dogecoin (DOGE) taking the most significant hit, down 9.5% to $0.38, CoinGecko data shows.
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