This week the market suffered a panic sell-off and went down to $3,850, seeing the third-largest percent drop of 37.53% after 2011’s 38.67% and 2013’s 48.57%.

Bitcoin has been seeing a drop in its prices since the past month in line with the stock market, so much so that the 90-day correlation between the BTC price and S&P 500 climbed to its highest level ever, particularly after the recent price drop,

In a matter of a day, the correlation went from 0.1 to over 0.5, which could be expected to take a drastic fall again.

The reason behind the sell-off is not just the stock market and bitcoin but also typical safe-haven assets like gold and treasuries has been because of the rapidly spreading Coronavirus (Covid-19) outside of its epicenter China.

However, for the bitcoin market, it has been a little more than that. As we saw on Feb. 13, the crypto asset was trading at $10,500 that fell down to $8,000 level on March 12 when the extreme sell-off took place.

There have actually been whales dumping BTC as large amounts of bitcoin were transferred to exchanges prior to this sell-off. To start with, the $2.9 billion pyramid scheme PlusToken that has been still holding 61,229 bitcoins transferred 13,000 of bitcoin from its wallets to exchanges via mixing services over the last weekend.

Historically, the transfers from PlusToken wallets have coincided with large widespread sell-offs in the market just like this time, according to Arcane Research. Following this wallet transfer, bitcoin plummeted from $9k to $7,500. 13k BTC that were sent to exchanges has been likely to be sold off in the market as the selling persisted over a longer time frame which could be part of the reason behind the price crash on Thursday.

Additionally, another 1000 BTC that belongs to an old mining wallet that dates back to 2010 were also sent to 55 different exchange wallets on Thursday. And soon after BTC price fell from $8k to $7,500 which could have initiated the third-worst trading day in the history of bitcoin.

Besides these huge amounts of Bitcoin, BitMEX liquidations also played a part in the Bitcoin price crash. On Thursday, the crypto derivatives exchange had its largest liquidation rate ever, liquidating $76 million during the massive and a violent sell-off.

These liquidations were further extended into the night when more than $300 million were liquidated only to come at a screeching halt as BitMEX went down for maintenance due to hardware issues.

It has been during this period, that the price of bitcoin bounced hard, jumping 35%, going to $5,200. As we reported, many speculate that it had nothing to do with hardware issues but was done to avoid a total collapse.

The liquidations were likely larger than the liquidity, leading to a massive feedback loop of liquidations which means it could have potentially led to clearing the order book all the way down to zero.

However, BitMEX denied such theories and provided evidence that the downtime was actually due to CPU pressure. The exchange also said that they have a healthy insurance fund for these kinds of events.

Currently, staying above $5,000, the market is in “extreme fear” but if it starts going down, the support is present at $4,000, a level that has historically seen a lot of trading activity.

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