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What Caused the Bitcoin Price Crash and What’s Next as BTC Bounces Above $61K

What Caused the Bitcoin Price Crash and What’s Next as BTC Bounces Above $61K

Bitcoin’s recent price crash has left many traders and analysts speculating on the future of the cryptocurrency. Willy Woo, a prominent figure in the crypto industry, has offered some insights into BTC’s short-term price targets.

The price of BTC saw a significant drop recently, hitting a low that had not been seen since May. However, the cryptocurrency quickly bounced back, reaching a value above $61,000 after the crash.

This sudden volatility led to numerous liquidations in the futures market, with approximately $360 million being liquidated within 24 hours. Most of these liquidations were long positions, as expected. Coinglass data revealed that around $280 million of the liquidations were long positions.

Woo attributed yesterday’s crash to a cascade of long liquidations in the futures market. He mentioned that the initial target for leveraged positions to be wiped off was around $62,500. However, more speculators entered the market and added to new long positions, resulting in a cascading long squeeze and further liquidations.

Another contributing factor to the crash was the capitulation of miners. Woo stated that miners were selling off their BTC holdings to cover the costs of upgrading their hardware, as the old equipment was no longer profitable. This closure of weaker mining operations also led to liquidations.

Woo predicted that there would be a short-term reversal in the BTC price, which was indeed seen as it climbed back up to around $61,000. However, he cautioned that the cryptocurrency is not yet out of the woods. It is essential to monitor how much speculation, particularly leveraged positions, has been cleared out of the system.

Woo emphasized that without purging futures open interest, the system is not ready to move upward. Currently, less than 3% of the BTC open interest has been wiped out in the past 24 hours, indicating that there may still be some market adjustments to come.