Bitcoin investors went to bed with a smile on their face and woke up scratching their head wondering what happened

Per usual for bitcoin and crypto investors, bitcoin experienced and extreme bout of volatility basically out of no where and seemingly on no news.

After briefly getting as high as $12,100 late last night (or early this morning depending on where you live), the price tumbled all the way to $10,600.

And it did so in less than an hour's time.

If you took a long shower you might have missed the entire drop.

Here's what it looked like on a 1H chart:

(Source: https://twitter.com/TheCryptoLark/status/1289834241627320320/photo/1)

For anyone doing the math, that was a 13 drop in less than an hour.

Um, what happened?

Like I mentioned above, there wasn't really any one catalyst that caused the price to drop like that.

Instead, it was likely caused by liquidations at various derivative exchanges.

Bitmex being the most likely culprit.

Due to the extreme leverage available, 100x in some cases, big moves in prices can be exacerbated by the extreme leverage offered at Bitmex.

Based on an article in Cointelegraph this morning, there was over $1 billion worth of contracts liquidated during that drop...

https://cointelegraph.com/news/1-billion-liquidated-as-bitcoin-price-crashes-by-14k-in-minutes

Though it didn't all come from Bitmex.

This drop may actually be a good thing...

Most of you reading this post will probably find this hard to believe, but it is very possible this big drop ends up being a good thing.

How in the world could a 13% drop in minutes be a good thing you may be wondering...

Well, it got all the "weak hands" out.

Those with stop losses trailing the move up by 10% or 5% or whatever number they used for their stop losses.

These were the ones that were looking to get out in the near term anways and would have likely created resistance as the price climbed higher by puting sell orders up.

Not only that, but it likely shook anyone out who was watching the price climb higher the previous days with their finger on the sell button.

A drop like that would have them scrambling for the exits trying to preserve whatever gains they could.

In the medium terms shaking the tree like this and getting the weak hands out will allow bitcoin to go even higher than it likely would have without these shake outs.

That being said, we may chop around a bit for several days or weeks before we start marching up again, but overall I do believe this selling will be short lived.

Hopefully at some point it drags STEEM up with it.

Stay informed my friends.

-Doc