Bitcoin (BTC) toll dropped from $ten,000 to $8,100 within just over a solar day as information technology plunged by 9% in a single hour. It liquidated $200 million worth of longs, obliterating the futures marketplace.

The three key reasons that triggered the immense Bitcoin correction were: stiff multi-twelvemonth resistance area to a higher place $x,000, whales moving to short the market on BitMEX, and farthermost volatility heading into the halving.

$10,200 to $x,500 is a multi-year strong resistance surface area for Bitcoin

Since mid-2018, the $10,200 to $x,500 range served as a historically potent area of resistance for the summit-ranking cryptocurrency by market capitalization.

Subsequently its commencement breakout above $10,500 in June 2022, which led to a swift run to $14,000, Bitcoin failed to motility above that level five out of six times in the last two years.

Bitcoin rejects $10,000 ahead of halving

Bitcoin rejects $10,000 ahead of halving. Source: Tradingview

When the Bitcoin price initially bankrupt down at $10,100 on May 8, it signaled the rejection of a central resistance level and left BTC vulnerable to a steep correction.

As whales started to sell at $9,900, information technology led to a cascade of long contract liquidations primarily on BitMEX and Binance Futures. In one hour, more than $200 million worth of longs were liquidated.

Whales apace moved to sell BTC at the point of rejection

Almost as soon as the rejection of $10,200 was confirmed, whales started to fiercely short Bitcoin beyond major cryptocurrency exchanges.

The open involvement on the big four derivatives exchanges that include Binance Futures, BitMEX, Deribit and OKEx plunged. The term open interest refers to the total corporeality of long and short contracts open at a given time.

Open interest of BitMEX Bitcoin futures contract

Open interest of BitMEX Bitcoin futures contract. Source: Hsaka

The rapid decline in open up interest meant that as selling force per unit area began to build upward, it caused over-leveraged buyers in the futures market to go trapped in their positions.

The funding rate on Bybit, Binance Futures and BitMEX remained at around -0.05%. A negative funding rate when the price of BTC is going down means that the overwhelming majority of the market is holding short contracts, expecting BTC to driblet further.

In other words, many traders, especially whales, betting against BTC at a critical reversal point of a long-term trend triggered a sharp drop in a brusk menstruation of fourth dimension.

Massive volatility ahead of halving

Alee of the Bitcoin block advantage halving set to occur on May 12, trading activity on all major cryptocurrency platforms surged significantly.

CME saw record-high open up interest, Deribit recorded all-time high volume for its options contracts, and spot exchanges demonstrated 2022-esque book in the terminal three weeks.

When many new investors enter the market in anticipation of a major upshot, it opens the market place up for a steep selloff.

For case, after the 2022 cake advantage halving, the Bitcoin price dropped by more than xxx%, every bit traders reacted with a sell-the-news response.

A confluence of an over-extended Bitcoin rally to $10,000, whales front-running retail investors with a sharp sell-off at $9,900, and high anticipation for the halving are triggering a near-term pullback prior to the May 12 Bitcoin halving.