(1) Bitcoin has retraced the majority of the dramatic crash on March 12th - over 80%. There are a number of theories for why price dropped so hard. The most logical and the one supported by those in the know is that Bitcoin dropped because it is a liquid asset - easy to sell.
(2) People needed cash, the bond market book was empty and stocks were dropping dramatically. It stands to reason that large players exposed to Bitcoin would risk-off. That said, 70% of Bitcoin did not move, so a small percentage of the existing Bitcoin is being traded and moves
(3) the price. Fine. The second leg of that crash was clearly a result of inefficient liquidation engines (namely on Bitmex) liquidating overleveraged longs into an empty order book. We can effectively disregard the second half of the crash (from $5000 to $3800 or so), because
(4) it was unintentional selling triggered by the large players selling at higher prices. This is clear - Bitmex went down for "maintenance" and price jumped 50% in a single 12-hour candle, back to almost $6,000. It's fair to assume the meaningful drop, then, was from 8K to 6K.
(5) Assuming these theories are correct, we can assume that those who had the Bitcoin to sell and needed to sell it have already done so. They liquidated their holdings to raise cash to cover losses elsewhere. If you are still bearish and think lower lows are coming (possible),
(6) you have to believe that there are still many players in the market who are looking to liquidate their assets that did not do so on March 12th. For me, that is a stretch, supported by the knowledge that the biggest holders (70%) have never sold anything. Following this,
(7) it is my OPINION that the large players who needed to sell have already done so, hence the sustained rise of Bitcoin since that day. It would take a tremendous amount of Bitcoin being sold to drive price down there again. I have been bullish since that day, because it
(8) looks like a technical and fundamental bottom to me. None of us expected a move to the $3,000s with that velocity - and that's because that move was not intentional. The easiest trade in years on Bitcoin has been longing every dip in the last month - period.
(9) As a result, the past month has been the most profitable I have ever had trading Bitcoin, without ever taking a short. I am in no way advising a trade here, or saying to buy Bitcoin today. This is just my thinking on the recent drop and subsequent bottom.
