Market jitters gripped the cryptocurrency space again today after Bitcoin BTC/USD plummeted, raising concerns about a potential retest of the crucial $40,000 support level.
What Happened: Bitcoin may be on the brink of a significant price correction, potentially dropping to the $40,000 range, according to Andrew Kang of Mechanism Capital.
Kang highlighted the critical nature of Bitcoin’s current trading range and the potential market impact if it fails to hold.
“Most market participants are not appreciating the significance of a potential loss of a 4-month range on Bitcoin,” he stated.
He compared the current market scenario to May 2021, when Bitcoin and altcoins came off a parabolic rally, resulting in a significant correction.
Kang noted that the crypto market is experiencing near all-time high levels of leverage, with over $50 billion in leveraged positions.
Also Read: Mike Novogratz: ‘We’re Going To Get Positive Crypto Legislation No Matter Who Wins’
“The closest parallel we can draw is to that of the range of May 2021 where we also came off a parabolic rally of BTC and alts,” he explained.
This situation is compounded by the extended trading range of 18 weeks, compared to the 13 weeks seen during the 2020-2021 bull market.
Kang suggested that his initial estimates of a low $50,000 range might have been too conservative.
“It’s likely that my initial estimates of low $50ks were too conservative and we see a more extreme reset to $40ks,” he said.
Such a pullback could be damaging to the market, likely requiring several months of a downtrend or choppy trading before a potential reversal to an upward trend.
The implications of such a significant correction in Bitcoin’s price are profound, with a potential domino effect on the broader cryptocurrency market.
The extended period of recovery and market instability could deter new investors and shake the confidence of existing ones.
These market dynamics and their potential impact will be a focal point at Benzinga’s Future of Digital Assets event on Nov. 19.
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