The story behind the BTC shock



7.12.2021 – Special Report. Is the correction over now? Bitcoin crashed to around $46,000 in just a few days. Now the recovery is underway. As it looks, the crash had its origins overseas. The reason was probably a misinterpretation of the unusual US labor market report. We shed light on the background.

Looking back ahead: On Friday, the world still seemed fine for the BTC bulls and Bitcoin remained calm at around $57,000. Then it took off. A whopping flash crash of around 20 percent. A quick look at the chart analysis basics: the asset briefly pierced the 200-day line, then shot back up.

Margin call massacre  

Early Saturday morning in the normally quiet hours of Asian trading, momentum chasers en masse imploded – and BTC roared lower. Vijay Ayyar, head of Asia-Pacific at crypto exchange Luno, speaking to Bloomberg, said heavily leveraged buyers were flushed out of the market. And data collectors at Coinglass reported Saturday that more than 400,000 crypto accounts worth $2.6 trillion were liquidated in the past 24 hours. That compares with the current figure of just over 60,000 closed accounts.

Curious US jobs report

The culprit was Friday’s bizarre U.S. jobs report: for one, U.S. employers had added only 210,000 jobs in November, while analysts had expected 550,000. Seemingly a disaster. Those who only looked at this number may have mentally said goodbye to tapering – more cheap money, more inflation. And they probably took more long positions on credit.

But the official unemployment rate fell from 4.6 to 4.2 percent. Strong economy, then, closing the money floodgates. Bearish factor for cryptos. Bull Trap.

The puzzle’s solution: the US Labor Department produces TWO studies – one with data from employers, one directly from households. And the latter tells a positive story about the economy. Apparently, more people have been making a living as freelancers and self-employed. While companies – perhaps because of all the discussion about the Corona vaccination requirement – are not yet hiring as hoped.

Buy the dip

The conclusion: we suspect that the bizarre U.S. jobs report killed a lot of traders who had built up highly leveraged long positions on the cheap. The slow countermovement suggests that now more bargain hunters have entered again. All tapering notwithstanding. According to research by UBS, especially very small traders, crypto exchanges and also large whales stocked up to buy the dip.

Grayscale Investments of New York contributed another pertinent figure: It said 55 percent of its investors surveyed invested in bitcoin for the first time in the past 12 months. Did some of these newbies lose their nerve? Who knows. Yet the majority of newcomers are long-term investors, according to Grayscale. Perhaps some have now bought the dip. Fittingly, a prominent buyer came forward: Nayib Bukele, President of El Salvador, quickly stocked up and managed to buy almost at the intermediate low. We are keeping an eye on the matter for you!


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