Why the Bitcoin price just dropped below $9k in steep reversal, liquidating $83 million in longs

The Bitcoin price just dropped below the $9,000 level, hitting $8,964 on BitMEX. The sentiment around the cryptocurrency market noticeably declined after BTC rejected the $10,000 resistance level three times in a span of 15 days.

Briefly, before dropping to sub-$9,000, the Bitcoin price spiked to $9,275, trapping a large number of longs before plummeting by around $300 within less than 30 minutes.

The main catalyst behind the plunge in the Bitcoin price from $10,500 to $8,000s in the past two weeks has been the rally itself.

The Bitcoin price increased at a rapid pace from $6,410 to $10,500, by around 63 percent against the USD. As noted by several whales - individual investors who hold large amounts of Bitcoin - the rally was not backed with sufficient fiat inflow on spot exchanges and over-the-counter trading platforms.

The upsurge was primarily fueled by spoof or fake buy orders at key support levels, inorganically pushing the price up.

When the Bitcoin price goes up at such a fast pace in a short period of time, it is often met with a brutal correction that kicks off months of consolidation.

Traders are generally exploring $8,500 and $7,500 as two levels that have deep liquidity for Bitcoin.

The Bitcoin market tends to move towards an area that has the most amount of buy orders and liquidity.

According to Nik Yaremchuk, an on-chain analyst at Adaptive Fund, there is large liquidity at $7,500, which was previously tested when the Bitcoin price consolidated from $10,500 in late 2019.

The $7,500 level is also an area of high trading activity history based on the price action of Bitcoin throughout the past two years.