Bitcoin’s price has dropped below the critical support level of $60,000, hitting a low of $57,914 and experiencing a 7% decline since Tuesday. This downward trend has shifted market sentiment towards the bearish side.
Concerns have been raised by Andrew Kang, co-founder of Mechanism Capital, about a pattern in the Bitcoin market that resembles the conditions leading to the crash in May 2021. Kang emphasized the importance of the current market dynamics, pointing out similarities in leveraged positions exceeding $50 billion.
Kang adjusted his projections for Bitcoin’s bottom, suggesting a steeper fall to $40,000. This potential pullback could significantly impact the market, requiring a few months of consolidation and a downtrend before a reversal to an upward trend.
Experts are discussing open interest in the derivatives market, highlighting the complexity of market behavior beyond simple long and short positions. The May 2021 crash, which saw Bitcoin’s price drop by 56% following regulatory crackdowns and environmental concerns, serves as a cautionary tale of rapid shifts in investor sentiment fueled by external shocks and high leverage in the market.
At the time of writing, Bitcoin was trading at $58,736. The market may be on the brink of another severe downturn, according to Kang, due to high leverage and extended periods without significant price corrections.