Bitcoin Price Flash Crashes to $57K, Liquidating $475 in Longs

The Bitcoin price is trading at $57,224 as of 4:30 am EST, down 5% over the last 24 hours. BTC price has dropped over $8,000, dropping more than 12% from a high of $64,719 on April 30 to an intra-day low of $56,663 on May 1.

The drawdown in Bitcoin's price had been attributed to lacklustre performance of Hong Kong's spot Bitcoin ETFs on their market debut on April 30. In addition, the hawkish fiscal stance from United States treasury secretary Janet Yellen, coupled with the sentencing of crypto exchange Binance and founder Changpeng Zhao, contributed to worsening sentiment across the crypto market.

Data from Alternative, a platform that tracks "sentiments and emotions" around cryptocurrencies, reveals that investor sentiment has been on the decline. The Crypto Fear and Greed Index had reduced from  79 ("extreme greed") last month, and 72 and 67 ("greed") last week and yesterday, to rest at 54 ("neutral") at the time of writing.

The crypto fear and greed index. Source: Alternative.me

This means that the market is being driven by fear, uncertainty and doubt as investors enter a risk-off mode. However, Alternative says although extreme fear can be a sign that investors are too worried, it could also be a buying opportunity giving bulls a chance to buy more on the dip.

The drop in the prices of the largest cryptocurrency by market capitalization has led to a rush of liquidations across the derivatives market. Long derivatives traders appear to have been caught off guard, leading to a quick spat of leveraged liquidations.

In the past 24 hours, over $475.79 million in crypto positions have been liquidated across the crypto market, with $172.46 million wiped out in the last 12 hours. More than $145.51 million in long Bitcoin positions have been liquidated over the last 24 hours.

Crypto market liquidations. Source: Coinglass

Over 144,852 traders were liquidated, with the largest single liquidation being Ether/USD on OKX, valued at $6.07 million.

From a technical perspective, Bitcoin had lost two crucial support levels during the recent drawdown. The current sell-off has seen Bitcoin lose the support provided by the 100-day exponential moving average (EMA) currently sitting at $59,932.

If the sell-off continues, BTC may drop further toward the psychological level at $55,000 and later to the 200-day EMA at $52,000.

Note that the 200-day EMA has provided support for the price since mid-October when BTC embarked on a sustained uptrend. Therefore, this is where the downside could be capped for Bitcoin.

BTC/USD daily chart. Source: TradingView

The relative strength index (RSI) is nosediving toward the oversold region and the price strength at 31 suggested that the sellers were in control of the Bitcoin price.

However, the position of the RSI near the overbought region suggests that the market might soon reach a bottom over the next few days which could be followed by a sustained recovery toward $70,000.