The price of Bitcoin (BTC) recently fell below the significant support level of $60,000, dropping even further to below $58,000.
Over the past 24 hours, BTC has declined by approximately 5%, trading at $57,400 at the time of writing (July 4).
Discussing the declines over recent trading days, Andrew Kang, co-founder of Mechanism Capital, expressed serious concerns about the current market trends, which he believes resemble conditions that led to the significant crash in May 2021.
Additionally, he emphasized the critical nature of the current market dynamics that many are overlooking:
“Most market participants are not appreciating the significance of the potential loss of Bitcoin’s 4-month range. The closest parallel we can draw is to the range in May 2021, when we also exited a parabolic rally of BTC and altcoins.”
Kang highlighted similarities in current market conditions, especially regarding leveraged positions, which now exceed $50 billion:
“This figure excludes the Chicago Mercantile Exchange (CME)… but is complicated by the fact that under this scenario, we have an even longer range (18 weeks compared to 13) and still haven’t had extreme washouts, whereas in the midst of the bull market in 2020-2021, we had several.”
Read more:
The largest Bitcoin mining company did not sell any Bitcoin last month
Kang also revised his forecast for the Bitcoin bottom, suggesting a more significant drop than previously expected:
“It’s likely my initial estimates for low values around $50,000 were too conservative, and we may see more extreme [losses] down to $40,000.”
He warned that such a decline could heavily impact the market, necessitating several months of consolidation and a downtrend before any potential upward reversal.
In hindsight, the May 2021 decline was marked by a rapid shift in investor sentiment, exacerbated by external shocks and further intensified by high market leverage.
According to Kang, similar conditions are now emerging, characterized by high leverage and prolonged periods without significant price corrections, suggesting that the market may be on the brink of another serious decline.
