By CCN: On May 31, the bitcoin price briefly hit $9,000, achieving a new 2019 high in a powerful recovery from around $8,500.
Within minutes, the bitcoin price crashed from $9,000 to $8,200, falling as low as $8,000 on Bitstamp.
Technical analysts generally consider the sudden rally of the bitcoin price and its abrupt dump to be a case of a fakeout breakout fueled by the liquidation of contracts on BitMEX.
Was it a case of bitcoin manipulation?
Although a drastic decline in the bitcoin price at a pace in which it fell as soon as it reached $9,000 was largely unexpected by many traders, as cryptocurrency technical analyst Josh Rager said, the trend resembled a classic fakeout pattern.
$BTC – it’s not perfect but looks like distribution to me
The fake-out over resistance before dump – classic pic.twitter.com/mGsxJYwhgN
— Josh Rager 📈 (@Josh_Rager) May 31, 2019
James Chen, the director of trading at Investopedia and former Gain Capital Head of Research, explained a fakeout as:
Fakeout is a term used in technical analysis to refer to a situation in which a trader enters into a position in anticipation of a future transaction signal or price movement, but the signal or movement never develops and the asset moves in the opposite direction.
Technical indicators pointed toward sustainable momentum for bitcoin in the near-term but as an abrupt sell-off occurred, both short and long contracts on BitMEX were liquidated, further accelerating the rate in which bitcoin and the rest of the cryptocurrency market fell.