The story behind the BTC shock

By 07/12/2021News
stockmarket

stockmarket

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!

 


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.