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‘Classic top setup’? Bitcoin price flash crashes on Kraken after all-time high

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Bitcoin (BTC) reached a brand new all-time excessive on varied exchanges on Nov. 30, however one document, specifically, hit the headlines for a unique cause.

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Knowledge from cryptocurrency trade Kraken exhibits BTC/USD hit its highest ever worth on its order e book — then dove to $16,600 in seconds.

Kraken BTC worth dumps $3,000

The rationale for the crash, which can have liquidated a lot of positions and brought on appreciable ache for a lot of a speculator, was seemingly what is called a “stop-loss run.”

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Cease-loss runs contain large-volume merchants who deliberately place massive promote orders at a selected worth level, then goal the place they suppose a lot of stop-loss positions reside. On this case, the goal was round $16,600, close to the placement of final week’s native backside.

The result’s a cascade of promoting strain that in a short time delivers the outcome, if efficiently estimated, just for the market to subsequently rebound as soon as the method is over.

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Kraken XBT/USD 1-minute chart displaying crash. Supply: TradingView

Liquidity threat is all the time a given think about trade buying and selling, and Kraken’s one-minute wick down by $3,000 aptly demonstrates why merchants ought to train warning round important worth factors.

One other clarification, or presumably one which contributed to the occasion, was traders selecting to exit at close to $20,000 to be able to keep away from the prices of a sudden reversal at resistance.

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Bollinger cautions over “traditional prime formation”

“OK, time to concentrate, $BTCUSD. That could be a traditional prime setup,” John Bollinger, creator of the Bollinger Bands volatility indicator, warned.

“No affirmation but and the setup might simply be overrun, however clever merchants ought to wash their glasses.”

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When requested by a Twitter consumer if it is a native prime or whether or not Bitcoin’s worth will go down from right here, he responded that “For now, a possible native prime…”