The price of Bitcoin (BTC) has recently dropped below the important support level of $60,000, even falling below $58,000.
In the past 24 hours, the price of BTC has declined by about 5% and is currently trading at $57,400 at the time of writing this article (July 4th).
Andrew Kang, Co-founder of Mechanism Capital, expressed serious concerns about the current market trend, stating that it reminds him of the situation that led to the significant crash in January 2021.
He further emphasized the critical nature of the current market dynamics that many people overlook:
“Most market participants don’t realize the significance of the potential losses within a 4-month range for Bitcoin. The closest similarity we can draw is the range in January 2021 when BTC and altcoins also broke parabolic rebounds.”
Kang pointed out the similarities in the current market conditions, especially in terms of leverage, where leverage positions currently exceed $5 billion:
“This number doesn’t even include the Chicago Mercantile Exchange (CME)… But what’s more complex is that our range is longer (18 weeks versus 13 weeks) and we haven’t had extreme washout markets before mid-2020 bull market – we had several in 2021.”
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The largest Bitcoin mining company did not sell any Bitcoin last month.
Kang also revised his prediction for the bottom of Bitcoin, indicating that the decline in Bitcoin is more significant than previously expected:
“My initial estimate of a minimum of $50,000 may have been too conservative, and we could see more extreme [losses] up to $40,000.”
He warned that this decline could have a strong impact on the market and that several months of consolidation and downward trends are needed before any upward reversal occurs.
Looking back at the decline in January 2021, it was mainly triggered by rapid shifts in investor sentiment due to external impacts and further intensified by high leverage in the market.
Kang stated that a similar situation seems to be forming so far, with high leverage rates and a lack of significant price adjustments, indicating that the market may be on the edge of another major decline.
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