Bitcoin (BTC) over the past roughly 24 hours has suffered its steepest daily drawdown, near $40k, in almost four months in a massive leverage wipe-out as traders were reminded of the crypto’s occasional steep bull market corrections.
Over the space of a few minutes Sunday evening, BTC plunged to near $40,300 from around $43,800 in what could be termed a “flash crash.”
Prices quickly recovered to $42,400, but then started to slide again during US afternoon hours to as low as $40,200, a level it broke through on the way up a week ago.
At press time, the largest crypto had bounced back above $41,000, still down nearly 7% over the past 24 hours, but on track to be the worst daily drawdown since BTC’s drop below $25,000 on August 17.
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Is Correction to $39,000 Likely?
Sharp drawdowns have been part of every previous bitcoin bull cycle but have been elusive in the past weeks as BTC rose nearly without pause from $27,000 to nearly $45,000 since Oct. 1.
The current correction shouldn’t have come as a surprise and was due to happen at some point, bitcoin-focused market analyst Will Clemente said.
BTC just ~doubled in 2 months with no pull backs, a correction is not that surprising.
Corrections shake out “weak hands” and leverage, allowing for a stronger foundation for eventual moves higher.
Bitcoin’s volatility is a feature, not a bug.
Chill with the leverage 🫡 https://t.co/BdvvS8KDZU
— Will (@WClementeIII) December 11, 2023
These pullbacks are necessary to unwind excessive leverage for a more sustainable price action, he added.
“BTC just nearly doubled in 2 months with no pullbacks, a correction is not that surprising,” Clemente posted. “Corrections shake out ‘weak hands’ and leverage, allowing for a stronger foundation for eventual moves higher.”
The decline wiped out over $520 million in leveraged trading positions on the crypto derivatives market, predominantly longs betting on rising prices, CoinGlass data shows. It was the largest level of daily liquidations in at least three months, according to the firm.
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On-chain analyst Willy Woo says he’s anticipating Bitcoin (BTC) will retest the $39,000 zone before any potential bullish continuation.
Woo tells his one million followers on the social media platform X that Bitcoin has a gap near $39,700 on the Chicago Mercantile Exchange (CME) futures market.
The #Bitcoin CME Gap at 39.7k…
By my count 28 out of 30 gaps have been filled on CME daily candles (93%). The other unfilled gap is pictured in the lower left of this chart also. pic.twitter.com/EyccaJTTkr
— Willy Woo (@woonomic) December 7, 2023
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