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▲ Trump, Bitcoin (BTC) / ChatGPT Generated Image ©
As a sudden geopolitical crisis shaking the global macroeconomic environment strikes the virtual asset market, the focus of investors worldwide is on the background behind the flagship asset's sudden plunge overnight. Amidst a sharp contraction in overall investor sentiment in the virtual asset market, this crash is analyzed as a result of a combination of external macro shocks and a chain of liquidations in the derivatives market, rather than a fundamental change in the assets themselves.
According to cryptocurrency market aggregator CoinMarketCap on May 23 (local time), Bitcoin (BTC) fell by 3.34% over the past 24 hours, dropping to $74,668.76, leading the overall weakness in the virtual asset market. The most critical trigger for this sharp decline is the global spread of risk-off sentiment (avoidance of risky assets) due to escalating military tensions between the United States and Iran. As reports emerged suggesting potential U.S. military action, such as President Trump canceling his schedule and making an emergency return to the White House, market participants began to withdraw from risky assets, including virtual assets. Interestingly, during this process, BTC showed a unique movement, with its correlation with gold soaring to 57%, sharing the safe-haven inflow trend driven by changes in the macro environment.
The problem is that the initial decline, triggered by geopolitical shock, accelerated the pace of the crash by triggering a large-scale chain of leverage liquidations in the futures market. According to analyses by virtual asset media, the volume of long (buy) positions evaporated from the market over the past 24 hours exceeded $945 million, and among these, Bitcoin alone saw a surge of 933% compared to the previous day, with long liquidation volumes totaling $20.859 billion (reflecting original typo 208.59M). As the market had been overly optimistic and increased leverage, an external shock immediately led to a cascade of forced liquidations, where buying triggered selling, causing prices to plummet instantly.
From a technical perspective, BTC is currently testing a very critical support zone between $74,400 and $74,900. The 7-day Relative Strength Index (RSI), which measures short-term oversold levels, has dropped to 27.99, hinting at the possibility of a technical rebound. However, the market's ultimate direction is highly likely to depend on diplomatic resolutions and news of de-escalation in the Middle East. If the current support holds firm and investor sentiment begins to stabilize, a short-term relief rally up to the previous breakdown point of $78,100 resistance could be anticipated.
On the other hand, if the Middle East risk does not subside and the $74,400 support level breaks down easily, the market carries the risk of not being able to overcome downward pressure and retreating further to the next major support level around $72,000. While the short-term trend itself has entered a downward pressure phase dominated by selling, as the overheated leverage in the derivatives market has somewhat eased, it is time to take a cautious approach, closely monitoring the fluctuations in the overall virtual asset open interest and whether the $75,000 level can be reclaimed early.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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