Bitcoin Drops After Flash Crash. Why Prices Could Keep Dropping.

Bitcoin BTCUSD

-1.59%

and other cryptocurrencies tumbled Tuesday as a correction across digital assets following Bitcoin’s all-time high last week.

Prices could fall further and be vulnerable to flash crash dynamics amid choppy liquidity in crypto markets—even as analysts and traders remain upbeat about the outlook.

The price of Bitcoin has fallen 6% over the past 24 hours to $62,600, with the largest digital asset trading as low as around $62,350 in a recent trough. Bitcoin has corrected lower since hitting a record high close to $74,000 last week, a record level that came just a week after the token blew through its November 2021 peak near $69,000.

“Bitcoin is down [at] its lowest level in two weeks,” said Alex Kuptsikevich, an analyst at broker FxPro. “A close below $65,500 would signal a move to a deeper level—the classic 61.8% retracement of the rally with a potential target near $60,000.”

Current price action looks like a short-term—but not insubstantial—correction across crypto, with profit-taking among long-term holders possibly being a driving factor behind the move lower. A factor injecting volatility into Bitcoin may be variable liquidity across trading venues, with at least one recent instance of a flash crash. A flash crash is a phenomenon where an asset at least briefly trades far below its typical market price, often as a result of automated trading strategies and mismatches in liquidity or a very unequal ratio of buyers to sellers.

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