The Bitcoin (BTC) price dropped to $3,600 overnight, marking Bitcoin's biggest daily drop in the terminal seven years. Over $one billion worth of longs was liquidated on March 12, causing one of the about intense long squeezes in the crypto market's contempo history.

The main goad of the sudden 50% decline in the cost of Bitcoin inside a span of 8 hours was the 9.99% drop of the Dow Jones Industrial Average. The United States stock market experienced its worst sell-off since 1987, equally panic over the coronavirus pandemic intensified to unprecedented levels.

In the past 7 days, Bitcoin and cryptocurrencies in general have shown a high level of correlation with the U.Southward. stock market place, possibly due to the overall drop in investor ambition for high-gamble assets. The steep correction in the U.S. stock market together with a lack of ownership demand equally Bitcoin's price brutal to the low $v,000 levels ultimately led the price to decline to $3,600.

Traders explicate the technical reason behind the drib

Until the global financial market begins to show signs of recovery, potentially through the introduction of more stimulus packages from central banks in Europe and the U.S., Bitcoin is likely to remain vulnerable to abrupt pullbacks in the virtually-term.

Speaking to Cointelegraph, cryptocurrency trader and technical analyst Eric Thies said that while the focus of investors has solely been on the coronavirus pandemic, there have been major geopolitical conflicts and risks affecting the market place as of late, such equally the the dispute over oil prices between Saudi Arabia and Russia. The unexpected reject in the price of oil further imposed additional pressure on global markets, adding to the incertitude, fearfulness and instability felt by investors. As Thies said:

"Today'southward massive dump in both the crypto markets and the traditional markets was very interesting to say the least. While many would say it is solely due to the coronavirus, looking into it further and you will run across this does not testify the usual signs of a recession. This may be because of the war on oil that many people have non heard almost due to the news of the virus."

Thies noted that with the drib to $three,600, a new market bike for Bitcoin could brainstorm. Summit traders have said in the last 24 hours that the overnight plunge of Bitcoin could kickstart a long accumulation phase, similar to in early 2022.

If that happens, institutions could keep to accumulate BTC at lower prices if the appetite for adventure-on assets improves over time, making the market less concentrated on whales or individuals that own a significant amount of BTC. Thies explained further:

"Ane thing I think that is disregarded by many crypto investors is the money menstruation in this new market bicycle. This is the starting time marketplace cycle where the weight of the coin will potentially exist held by institutions. That means that Bitcoin is at present tied to the traditional markets, and far from being a rubber oasis when it comes to the emotional cycles of humans, and our instinct to save our coin when we become fearful."

Throughout February, the Grayscale Bitcoin Trust showed a premium of around 30% relative to the spot exchange price of Bitcoin on platforms like Coinbase. This represented a steady arrival of capital from accredited and institutional investors in Bitcoin.

The Bitcoin price crashed down into the $3,000s because of the highly leveraged nature of the cryptocurrency market and the unwillingness of buyers to step in amid extreme volatility and dubiousness. Afterward the drop, the liquidity of Bitcoin wore to the point in which a limit sell order of around $11 1000000 was lowering the BTC price on BitMEX by $300 relative to other exchanges. Cryptocurrency trader Jacob Canfield explained in a tweet:

"This guy is trying to offload $xi million here with limit sells, simply information technology's been holding the price down relative to other exchanges. Mex was running $300 lower than nigh whatever other exchange due to liquidation backlogs."

$11 million limit sell order for BTC on BitMEX

$11 million limit sell order for BTC on BitMEX. Source: Jacob Canfield Twitter

A large portion of the daily cryptocurrency exchange market volume comes from futures trading platforms like BitMEX, OKEx, Binance Futures and FTX. This suggests that the majority of traders in the cryptocurrency market are trading major cryptocurrencies with borrowed upper-case letter.

In times of heightened volatility and unforeseen market sell orders in the hundreds of millions of dollars, Bitcoin'south cost could react with a astringent correction with no terminate in sight, such as on March 12. Before the big drop occurred, Thies said that $4,800 looked as the next logical level of support based on previous areas with high trading activity. Thies said prior to the drib to the $three,000s:

"It appears BTC may accept been caught by the $5.6K breakout range from 2022. For bulls, the only good sign at the moment is that information technology technically confirms last years breakout as a legitimate change in trend from the 2022 deport trend, with a successful back-exam of that break out range."

The Bitcoin price dropped beneath every major back up, even further than the last remaining support at $iv,800 across all major exchanges, equally nigh all longs in the market were wiped out in a bridge of several hours.

A screenshot shared past well-known cryptocurrency trader I am Nomad showed an investor on BitMEX losing 1,220 BTC overnight, which would have been an equivalent of $9.seven million before the drib.

More than $1 billion of longs was liquidated in the last ii days on BitMEX alone, precisely considering big longs to a higher place $10 meg started to be stopped or liquidated, which then turned into strong selling pressure.

Industry executives remain positive afterwards the big drop

In the backwash of the fifty% drop in the price of Bitcoin, peak industry executives that oversee the sector'south largest investment firms expressed their belief in the asset class and confidence in the long-term trend of the market.

Michael Sonnenshein, the managing manager at Grayscale — which oversees the Grayscale Bitcoin Trust, a publicly tradable Bitcoin investment vehicle with around $2 billion in assets under direction — said that he hasn't doubted his faith in the cryptocurrency industry and the community amid this extreme volatility:

"I'm vii+ years into my digital currency journey. Years ago I'd wake up in the middle of the night to cheque prices or allow my stomach to churn when the market dropped precipitously, simply I never in one case lost religion in what this incredible community has built. Stay strong. HODL on."

The billionaire CEO of Galaxy Digital, Mike Novogratz, said that the confidence of investors across the globe in only about every asset seems to have dropped, which makes Bitcoin all the more valuable in the long term. Paolo Ardoino, the main technology officer at Bitfinex, said that ane single twenty-four hours does not brand a market, adding that:

"Bitcoin is a battle tested asset which in time will show its underlying strength equally a genuine store of value. While Bitcoin has grown to fruition during a menstruation of massive QE from central banks information technology will in fourth dimension prove its metal equally these policies surely begin to fail."

According to Thies, ane positive takeaway from the marketplace crash is that information technology occured at the beginning of the month, leaving more fourth dimension for BTC to recover and stabilize. Had the drop happened in tardily March, information technology would have caused larger time frame candles like the monthly candle of BTC to shut with a drop to the $three,000s, which could have established an intensely negative precedent for the months to come up. Thies ended:

"Although we aren't sure what commotion ensues in the media and markets from here, just know this: Buy when people are fearful. Sell when people are greedy. Times like these, in which emption and stop-losses are triggering catastrophic results are typically a sign of true capitulation and ofttimes a time to countertrade the masses."