Recent Bitcoin Crash Caused by “Leveraged Trading and Miner Behavior” Analyst Explains

Willy Woo, a well-known cryptocurrency analyst, recently provided an explanation on X for the 8% drop in the price of Bitcoin, which fell from around $66,000 to just below $59,000 over the past two days. Addressing his 1.1M+ followers on the social media platform, he attributes the plunge to a combination of leveraged trading and miner behavior.

Flushing Out Leverage and Cascading Long Squeeze

Woo begins by noting that he typically avoids short-term price analysis, preferring to focus on longer time frames. However, due to the current market fear, he offered insights into the recent developments. He explains that the market has been “flushing out the leverage,” with $62.5k being the target to eliminate significant leveraged positions. However, “speculators kept adding to new long positions, just adding more fuel for more liquidations in a cascading long squeeze,” leading to a cascading effect that pushed the price down to the $58k range.

Post-Halving Miners’ Capitulation

In addition to the liquidation squeeze, Woo identifies a post-halving miners’ capitulation. “Miners are on a BTC selling spree to pay for hardware upgrades due to the old hardware no longer being profitable. The weakest miners closing shop and being liquidated,” he explains. This selling pressure from miners further exacerbated the price decline.

Potential for Reversal and Future Outlook

Woo also mentions that short-term technical indicators suggest a potential reversal, which could correct the market’s overselling. “Short term technicals point to a reversal playing out here. 2 hours away from a TD9 reversal on daily candles. If this plays out, then we go into a hidden bullish divergence to correct for the overselling of the market,” he says.

Despite the potential for a reversal, Woo emphasizes the need to purge speculative futures interest for the market to stabilize and potentially reach price lows. “BTC is not out of the woods, we just need to see how much speculation got cleared out of the system. Without purging futures open interest the system is not ready to move up,” he states.

Woo notes that the next significant level of liquidations is at $54k, which is critical as it sits below the short-term holders’ price, potentially signaling a bearish phase if reached. “$54k is the next layer of liquidations. And to do that, it’s so far below short term holders price that it would tip BTC into a bearish phase. (STH price is a line in the sand between bull and bear regimes.) This is hard to do within the macro structure,” he explains.

Woo concludes by highlighting that miner capitulation is a strong indicator for an eventual rally, suggesting that patience is required as the hash rate increases and speculative trading diminishes. “A miners capitulation is one of the highest reliability indicators for a subsequent rally, ending periods of sideways or bearishness. Really it’s a waiting game for hash rate to climb and for the futures casino to subside,” he says.

At the time of writing, Bitcoin has recovered a bit and seems to be slowly crawling back, trading at $61,097 according to CoinMarketCap data.