Two Catalysts Driving Bitcoin’s Downward Spiral, According to Analyst Nicholas Merten

Prominent analyst Nicholas Merten is identifying two key factors propelling the current Bitcoin price correction.

As Bitcoin takes a dive this week and faces a nearly 20% correction within seven days, Merten takes a look at some of the reasons Bitcoin is taking a plunge.

The analyst first addresses the narrative that corporate treasuries will cause the price of Bitcoin to enter into a supercycle and pump to sky-high levels, saving it from remaining at the low $50,000 range or even $40,000.

While Merten believes rising corporate interest in crypto assets is definitely a bullish signal for Bitcoin, he says that traders are overestimating how eager institutions are to jump into the flagship cryptocurrency at sky-high prices, which means that the dips don’t always get as bought up as aggressively as traders expect.

“This whole narrative that people had about, ‘Oh, the corporate treasurers, they’re going to cause the supercycle for Bitcoin!’ Guys, corporate treasurers are eager to get exposure to this asset class for sure, but they’re not eager to buy your bags at 7x from originally being at $8,000-$10,000. They’re not looking to pay $65,000 per Bitcoin with hard-earned cash that they’ve made. It’s not that big yet.

And I hate to say that. I love crypto. We know it’s that big. We know that it’s going to be a multi-trillion-dollar asset class. But corporate treasurers like to buy at a discount. They’re going to be the people that buy in when Bitcoin goes down to the $40,000-$50,000 range… I’d much rather buy at a low $40,000 range than at $66,000 all-time highs. A corporate treasurer is not going to do that.” 

The second key factor behind Bitcoin’s correction that Merten sees is the amount of overleveraged long positions that make BTC vulnerable to quick downward movements as strings of traders get liquidated.

“At the end of the day, people continue to trade on leverage, borrowing capital that they can’t afford to lose, and overexposing themselves to trades that they should not be doing.” 

The closely-followed analyst notes that long positions are getting liquidated at much higher rates than shorts, indicating an excess amount of greed in the markets.

“Shorts are losing at a very normal, healthy rate. What we’re seeing is longs getting liquidated… Who’s really the ones taking too much risk here? It’s the longs, guys. We can see the numbers here. Sure, we know Bitcoin’s probably going to $100,000, $200,000 or whatever exorbitant level we think is possible in this case. Sure, you can have all the price targets you want but if you try to overexpose yourself instead of just holding, remaining calm, or properly taking profits when things are overly exacerbated waiting for discounts as some people claim they can do properly… If you’re going to try and trade on leverage, you could lose it all.”

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Featured Image: Shutterstock/Tithi Luadthong