The Bitcoin (BTC) market has seen significant disruption over the past 24 hours following a series of disturbing news reports. During this period, the crypto market leader has registered notable setbacks, with its price falling below $66,000. However, a crypto analyst with X username Luca has postulated that this recent price drop can be attributed to a factor other than the news events.
Bitcoin Crash Due to Overloaded Market, Not a News Event: Analyst
The Wall Street Journal wrote on Friday reported that Tether was investigated by US authorities for possible illegal use of the USDT stablecoin in, among other things, money laundering, drug trafficking and terrorism.
Such a damaging report on USDT, which ranks as the largest stablecoin, seemed to trigger bearish sentiment in the crypto market, sending BTC down to around $66,000, prior to a rebuttal statement from Tether management. While the partial recovery took place, reports of an Israeli attack on Iran also sparked a new downtrend, forcing Bitcoin to hit a local low of $65,700. Overall, BTCs fell 4% from around $68,602 on Friday.
However, at one X message On Saturday, Luca stated that the price drop was caused by high Open Interest and not by the supposed news events. The crypto analyst explains that, amid Bitcoin’s downtrend, Open Interest also fell by 9%, indicating that the market was highly overleveraged.
According to Luca, BTC’s recent rally from $59,000 on October 10 to $69,000 on October 21 was driven by perpetual contracts with little to no spot investments. So the rally was always temporary, with significant liquidations and price reversals as a certainty.
Will BTC go to $60,000?
Regarding the high Open Interest in Bitcoin, Luca also states that the Liquidation Heatmap has shown that significant liquidations are taking place in so-called support zones, as these positions are highly overleveraged.
After the recent price drop, the analyst highlights that $65,000, which represents a key support level, is one of these high overleverage zones with several long positions. Luca believes that the Bitcoin bulls will lose this support zone if a new test occurs and that BTC will likely fall to $60,000, which could now be an effective support level.
At the time of writing, Bitcoin continues to trade at $67,001 with a gain of 0.50% on the last day. Meanwhile, the asset’s daily trading volume is down 28.23% and valued at $26.93 billion. With a market capitalization of $1.32 trillion, Bitcoin remains the largest digital asset in the world.
Featured image of Kinesis Money, chart from Tradingview