Bitcoin (BTC) crashed by $9,000 in hours on Tuesday thanks to a mass unwinding of leveraged traders and borrowers, one analyst believes.
In a series of tweets on Wednesday, Willy Woo sought to get to the bottom of what made BTC/USD dive to lows of $42,800 on Tuesday.
Woo: Bitcoin margin borrowers and open interest may be to blame
With rumors flying over who was behind Bitcoin’s major price dip, analysts have been crunching data in order to understand where the rout began.
Analogies to the March 2020 crash, sparked by coronavirus measures, abound, but Tuesday’s event showed major differences, Woo said.
“Leverage markets sold off but investor buying just got stronger,” he summarized.
“BTC flash crashes are caused by deleveraging, the COVID crash was similar in that derivatives overreacted, but back then it was supported by investors. This one was completely divergent and a mystery. Cheap coins.”
Woo subsequently suspected that the dip came as a result of margin borrowing and open interest. In a