Bloody Day on Bitcoin Day in El Salvador – What’s Happened and What To Expect From Now On?
Slowly up, then quickly down sometimes. That's part of the Bitcoin game.
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September 7, 2021, will forever be engraved in the history of Bitcoin, of El Salvador, but also of the world. It is the day when for the first time in history a country made Bitcoin an official currency. You must have seen the tweets of payments made in BTC at McDonald's or Starbucks in El Salvador.
History is clearly in the making for Bitcoin.
Today was supposed to be a celebration for the Bitcoin world: Bitcoin Day for El Salvador. The party did happen, but it turned into a bloody day in the markets.
From Bitcoin Day to Bloody Bitcoin Day
The price of Bitcoin gave us a heavy correction as it does from time to time. As I explained at the beginning of September 2021, this month is usually a bloody one for Bitcoin. It looks like history is set to repeat itself.
Everyone is wondering what happened as the Bitcoin price posted a daily bearish candle of just over $6K. At the height of the decline, the price of Bitcoin even bounced quickly to $41.9K.
So how did we go from a Bitcoin Day to a Bloody Bitcoin Day?
The pattern we encountered yesterday happens from time to time in the Bitcoin world. It revolves around three elements:
Futures are at premium levels, which means aggressive buying of BTC.
Open Interests are rising, which suggests that buyers are opening positions.
Bitcoin price rises, which means direct purchases of BTC on the spot market.
And then suddenly, the machine goes haywire. Unexpected bad news comes along. A ban on Bitcoin by China, a tweet from Elon Musk, the SEC attacking Coinbase, ... In short, unexpected news that destabilizes the markets.
A massive liquidation that wiped out nearly 400,000 traders
Initially, the price of Bitcoin falls slowly. And as it falls, aggressive buyers who bought at the local top-level are liquidated. The price continues to fall and things accelerate with a drop of more than 10% in a few tens of minutes.
This is what happened yesterday with liquidations hitting nearly 400,000 traders for $3.2B:
According to ByBt, the largest single liquidation occurred on Huobi-BTC for $43.7 million.
Traders using leverage caused this very large correction. The fact that the Bitcoin price rebounded strongly to close yesterday around $47K is a great thing.
This shows that the market is still in the bullish structure it has been in since the beginning of August 2021. So no need to panic for the moment. I say for the moment because we can never know what will happen tomorrow. September is always an uncertain month on the markets.
It is even more so at the moment as we are expecting announcements from the Fed or the ECB towards the end of the month which will have a big impact on the behavior of institutional investors who need to be reassured in terms of liquidity. Ideally, for Bitcoin, the two most powerful central banks will continue to play the firefighters arsonists by remaining faithful to their ultra-accommodating monetary policies.
At the time of writing, the price of Bitcoin is around $45.1K. We could very well be back in the $44K-$51K range that I mentioned earlier this week. We will have to keep an eye on what happens in the next few hours on the US market.
The current situation is an opportunity to accumulate more BTC. That is my feeling. On the El Salvador side, it seems that President Nayib Bukele also sees things the same way as the country took advantage of this dip to accumulate an additional 150 BTC to the 200 BTC already purchased at the beginning of the day on September 7, 2021.
El Salvador now holds 550 BTC.
A good way to show that its strategy with Bitcoin is long-term and will not be disrupted by corrections that only impact the short-term price of Bitcoin. Because the extraordinary potential of Bitcoin is still there.