The "Bart Simpson" price pattern, resembling the cartoon character's hairstyle, made a comeback to the bitcoin (BTC) market early Wednesday as the cryptocurrency saw a quick rise and fall in a thinly traded market.
Bitcoin jumped from $39,120 to $41,700 in 30 minutes to 02:15 UTC (10:15 p.m. ET) only to fall back to $39,000 by 03:30 UTC, CoinDesk data shows. The sudden rise perhaps stemmed from stop orders on short trades and ran into stronger selling pressure.
"There was a sharp jump in the rate from $39,200 to $41,700, followed by an almost equally rapid pullback to the area below $39,000. Stop orders were triggered in the morning low-liquid market, but it is clear that the selling pressure remains huge," Alex Kuptsikevich, senior market analyst at FXPro, said in an email.
"In fact, since Feb. 10, the rises in the bitcoin rate have become less and less long and end at ever lower levels," Kuptsikevich added.
The cryptocurrency has recently seen multiple bull failures above $42,000. The latest from today's Asian session likely resulted from the activity of market makers – entities quoting both a buy and a sell price in a tradable asset held in inventory satisfy the market.
"In sluggish and bearish markets, market makers have a tendency to be systematically short the market, i.e. they are outright selling on exchange and/or sell the futures," Laurent Kssis, a crypto exchange-traded fund (ETF) expert and director of CEC Capital said.
"If a spike like we've seen this a.m. occurs, then there is a risk the exchanges will call for more margin and hence [market makers] risk being liquidated. To avoid that, market makers push the market down, [perhaps by shorting the cryptocurrency in the spot or futures market]," Kssis added.
Broadly speaking, trading activity has cooled in recent weeks, as evidenced by the declining trending in daily trading volumes on major exchanges. As such, relatively smaller trade sizes can have a notable impact on the market.
"Recently, there has been a lack of dynamism in both the spot and derivatives markets. Yesterday's BTC spot trading volume was slightly over $7 billion, while the perpetual contract trading volume was only around $40 billion," Griffin Ardern, a volatility trader from crypto-asset management company Blofin said in a Telegram chat. " Since derivatives rely on index prices, it is not difficult to "spot blast" against the BTC index prices in several smaller exchanges in this case."
Looking ahead, the liquidity could remain thin at least until the Federal Reserve rate decision, scheduled at 18:00 UTC. The U.S. central bank is expected to hike interest rates by 25 basis points, kicking off the tightening cycle that is expected to take rates to highs of 2.5% from the current 0.25%.
Bitcoin was trading near $40,300 at press time, representing a 2% gain on the day.
UPDATE (March 16, 10:56 UTC): Federal Reserve rate decision is scheduled at 18:00 UTC. The previous version mentioned 19:00 UTC.
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