Analysts point to over-leveraged traders after Bitcoin flash crash to $ 43,000

Traders were caught off guard on September 7 after a sharp collapse in the price of Bitcoin ( BTC ) seen digital asset drops below $ 43,0...


Traders were caught off guard on September 7 after a sharp collapse in the price of Bitcoin (BTC) seen digital asset drops below $ 43,000, and this has led to widespread liquidations in derivatives markets, with more than $ 3.54 billion having been liquidated.

Bullish sentiment was on the rise at the exit of Labor Day weekend in the United States because Bitcoin was officially recognized as legal tender in El Salvador, but the celebration was quickly extinguished by the 16% drop in BTC.

Data Cointelegraph Markets Pro and TradingView shows that the sale of BTC started during the early hours of trading and accelerated until noon as the price of Bitcoin fell to a low of $ 42,837 before falling buyers arrived for the return above $ 46,500.

4 hour BTC / USDT chart. Source: TradingView

Here’s what traders are saying about this quick sell-off and what to watch out for as the market tries to digest the chaos of the day.

Longs are heavily liquidated as BTC sells

A fact-based analysis of the current state of the market was offered by channel analyst Willy Woo, who posted the following tweet outlining the developments on September 7.

As Woo noted, the broader financial markets opened the day at risk, which put pressure on the crypto market that followed as the day progressed.

The ensuing sale resulted in Bitcoin sellouts worth $ 1.1 billion, but data on the channel does not suggest investors are in a rush to close their positions, and the most recent activity shows that the exchanges are back in buy mode.

A follow-up tweet from Woo shows how unexpected the market move on September 7 was, a good reminder that risk management is always something to keep in mind in the crypto market.

Woo said:

“Not quite sure WTF just happened, but that’s the sequence of events. The liquidation mainly took place in derivative markets (like most crashes).

Possible outlier detected

Further analysis of the September 7 move in Bitcoin was provided by market analyst and Cointelegraph contributor Michaël van de Poppe, who also highlighted the role over-leveraged traders played in the day’s price movement.

According to Poppe, if BTC manages to close above the $ 47,000- $ 48,000 range after this pullback, the move will be seen as an outlier from the previously established trend and a good buying opportunity, if the uptrend resumes.

Related: El Salvador buys downside as Bitcoin flash price collapses to $ 42.9,000

Not all traders were caught off guard

Not all market participants were caught off guard by the September 7 drop, as the following tweet posted by analyst and pseudonymous Twitter user Crypto_Ed_NL points out.

A follow-up tweet included the following graphic showing that the scenario played out as Crypto_Ed_NL warned.

15 minute BTC / USDT chart. Source: Twitter

Crypto_Ed_NL noted:

“BTC has hit the green box. Let’s see how it bounces… .. This should be the case for this fix in my opinion.

The overall cryptocurrency market capitalization now stands at $ 2.13 trillion and Bitcoin’s dominance rate is 42.1%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.