3 Main Reasons Bitcoin Price Plummeted 14% in 15 Minutes to $8,600

The price of Bitcoin plummeted by 14% from $10,180 to $8,600 on BitMEX within less than 15 minutes.

Three major factors that caused the price drop were long contracts accounting for the overwhelming majority of the Bitcoin market, BTC reacting to a multi-year resistance at $10,500 and whales dumping.

Bitcoin was overdue for a long squeezeBefore the price correction occurred, the funding rate for Bitcoin and Ether hovered at around 0.16% and 0.19%, respectively.

The term funding rate in the Bitcoin futures market means the fee long contract or short contract holders have to pay their counterparts to establish balance in the market.

Let's say the price of Bitcoin is going up and the funding rate, which typically is at around 0.01%, rises to 0.16%. If a trader is holding a $100,000 long position, the trader has to pay $160 every eight hours to another short contract holder holding a $100,000 short position.

A signal something was amiss was the fact that prior to the price drop Bitcoin's funding rate was too high and around 75% of the market was holding long contracts.

The majority of traders were anticipating Bitcoin price to increase and were aggressively longing the market.

In February 2020, Bitcoin made another attempt to surpass the $10,500 resistance level.

Given the intensity of the drop and the breakdown of the short-term market structure, the probability of seeing Bitcoin testing higher resistance levels in the near-term found at $11,500, $12,400 and $14,000 decreased with the recent price action.

The combination of whales selling Bitcoin right at a multi-year resistance with high funding and the majority of the market being long triggered a strong long squeeze within a short period of time.