Weekly Bitcoin Analysis

NinjaWingnut Crypto
6 min readSep 8, 2021

Flash Crash! This weeks look at the Bitcoin (BTC) price action is going to be a little different than most, as I’m going to focus mostly on what happened with yesterday’s massive crash. I’ll still have a little prediction at the end, but it should of course be taken with more gains of salt than normal, as the market is very volatile at the moment.

For the usual disclosure, I am not a financial advisor, I don’t even work in finance at all. My day job is as a telecommunications software engineer. Treat everything you read here as some educational resources and not financial advice.

What Flash Crash

In case you haven’t see what happened in the markets for some reason, lets start with a little picture.

Bitcoin took a massive almost 20% dive yesterday, but recovered with about an 11% overall price reduction for the day. It caught me by surprise, but it really shouldn’t have, and when I started looking at the data, talking to some others in the crypto space, and watching some trusted YouTuber’s videos, it made a lot of sense.

Something else that is important to remember is recently, with the market rallying in price, a lot of Bitcoin was taken off exchanges. The final piece of information that is very key to have before I start breaking down what I think drove the market to it’s knees yesterday, is something I sent out on Twitter yesterday.

That is an insane amount of liquidations. Almost $4 billion dollars across the entire market, which is a metric boatload of people’s cash just *poof* gone, because as I’m sure a lot of that was institutional hedging getting wiped out, a lot of people likely got rekt yesterday pretty harshly.

What Happened

So here is how I think this all played out. Remember, I’m not an economist, or a financial advisor, so this is at best speculation and educated guesses, but it aligns with a lot of the sentiment out there, as well as what we saw happening. It all comes down to El Salvador.

Obviously, yesterday marked the official launch of El Salvador’s acceptance of Bitcoin as legal tender, and that is arguably one of the biggest news events in crypto this year, regardless of what you’re actual feelings on the matter are. I personally think it’s great, and a big step forward for crypto as a whole, but that’s a whole different story.

Leading up to yesterday, we have seen a pretty significant rally, with some pretty big gains. I’m going to save showing an image here for a bit, the impact will be better later on. This rally was partially driven by the market recovery from the earlier crash, but part of this was driven on the “rumor” of El Salvador’s move. I know it was far more than rumor, but my choice of term there is specific.

When yesterday hit and El Salvador’s acceptance became “news”, this is where a lot of institutions take some profits at. Buy the rumor, sell the news. That’s what big money does with their market plays.

Now, let’s go back to my earlier point about the Bitcoin flowing off exchanges in recent times. This means the market depth is not very deep. This leads to some very volatile prices and can cause things to move downward very quickly with just a few big sells. This leads to two things. The first is some people are going to see that dip and panic sell, especially if they are in profits and are trying to “protect” themselves.

For the second thing this causes, we can tie in the last big factor of this and that is the liquidations. Once the price started violently moving downward, this triggered margin calls and liquidations on anyone that had taken a leveraged long position, which was clearly a heck of a lot of people given the amount liquidated out of the derivates market yesterday. And if you look at the recent climate where the market had been down for awhile, and then was on a very solid rally, people want to get in on that, and they start taking out leveraged positions.

These liquidations of course cause the price to plummet even further, triggering more liquidations, and snowballing until it hits an equilibrium point, and then people gobble up that dip like it was the last French Onion dip. We can tell that happened by the massive wick off the bottom of yesterday’s candle. That was people buying that dip. Possibly the exact same people that sold off at the start and kicked the whole thing off.

Now, I’m not saying that if this is how it played out, that big money did it on purpose to up their Bitcoin count. But I’m also definitely not not saying that.

Are We Doomed

No. I’m not even going to bury that, no we are absolutely not doomed. Here is why I didn’t want to post another chart earlier, but lets zoom out from that crash yesterday, and just take a look from our low point a short few weeks ago.

Yesterday’s crash, while painful, doesn’t look all that scary when we zoom out a bit. We didn’t crash below the 200 day EMA, and we closed above the 50, almost even retook the 20. We also found support on a previous resistance line that we too, and today we found support at an even higher support line.

We couple that with the fact that there is a lot of good news and big events happening in the cryptoverse, and no doubt this is just a minor setback and things should get back on track fairly quickly.

My Prediction

My prediction for the week is that the price is going to have a couple of red days, but stay within our new support lines up here, and within a few days, I expect to start seeing green again, and things starting to get back to rallying. Yesterday was just a tasty dip and a buying opportunity, and I am not worried in the slightest and did not sell off any of my positions. These kinds of crashes are when selling your crypto on sale is not the best plan, and you should hold on and weather these kinds of storms.

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Originally Posted On My Website: https://ninjawingnut.xyz/2021/09/08/weekly-btc-11/