During the past weekend over the last two days, Bitcoin traders were surprised by a significant downward movement that brought the price of Bitcoin to levels around $24,000. Historically, it’s unusual for Bitcoin or cryptocurrency currencies to experience price fluctuations of around 10% within just two or three days.
The recent drop of 11.4% from $29,340 to $24,980 between August 15th and August 20th caught many off-guard and led to the largest liquidation in the cryptocurrency market since the FTX crash in November 2022. So, was this violent drop significant in terms of reshaping the cryptocurrency market?
From my perspective, the depth of the blockchain system reflects a decrease in sharp volatility, and market participants may have adjusted their algorithms to align with the overall market conditions. Here, the impact of the drop to $24,000 can be evaluated in terms of reshaping price movement in the cryptocurrency market, determining whether whales and market makers have become bearish or if they’re driving prices to reach higher levels in alignment with their protective hedging positions. To clarify, I’ll identify and compare similar cases in the recent past. The following two events stand out, as shown in the chart below:
Bitcoin/US Dollar Price Index 2023. Source: TradingView 
Above, we find that the first drop occurred between March 8th and March 10th, resulting in an 11.4% decrease in Bitcoin’s value to $19,600. This was its lowest level in over seven weeks at that time. This correction followed the liquidation of Silvergate Bank, a crucial operational partner for many cryptocurrency currency firms.
Following that, the second drop occurred between April 19th and April 21st, leading to a 10.4% loss in Bitcoin’s price, bringing it back to $27,250 for the first time in over three weeks at that time. This drop coincided with Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission, delivering a speech to the House Financial Services Committee. His statements didn’t offer much reassurance that the regulatory efforts led by the agency and enforcement would stop.
From the above, I see that not every 10% collapse in Bitcoin prices has the same impact on the markets. Quarterly Bitcoin futures generally tend to trade at slight premiums compared to spot markets. This reflects sellers seeking additional profit in exchange for delaying the sale of their coins. Conventional markets often see BTC futures trading at annual profits ranging from 5% to 10%. This situation is known as ‘contango’ and is not unique to the cryptocurrency currency field.
Additionally, the speed at which the cryptocurrency currency market priced in the shock on August 18th is noteworthy. The futures profits quickly reverted to a mildly bullish stance, increasing by 6%. In my opinion, this suggests that the recent drop to $24,000 did not significantly diminish the optimism of whales and market participants regarding Bitcoin and the cryptocurrency currency market.
Here, the futures markets confirm the absence of bearish momentum, as current data in the cryptocurrency markets indicates an excessive demand to buy Bitcoin from levels of $24,000 and $25,000 before the recent collapse. However, this does not guarantee a swift return of Bitcoin to the strong support level at $29,000. It does, however, reduce the likelihood of a sharp continuation of the price decline.
Also published on Medium.
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