Bitcoin (BTC) topped the entire cryptocurrency market in a turbulent period after most cryptocurrencies were colored red on May 19, also called Black Wednesday.

The price of BTC fell below $ 40,000 for the first time since news of Tesla’s $ 1.5 billion purchase of BTC broke out on February 9, with the announcement that the company would begin accepting bitcoin as payment.

As of this writing, the BTC price has recovered slightly to the $ 37,000 range, jumped between $ 36,000 and $ 40,000, and has failed to break through in both directions.

The irony of this major cryptocurrency price crash is that the reason for the crash was that Elon Musk expressed concerns about Bitcoin’s energy use and his Tesla company withdrew Bitcoin as a payment method. Cointelegraph discussed this in detail with the OKEx Market Insights team, a cryptocurrency exchange. A company spokesman explained the incidents and said they were just motives to shake up the hectic market:

“We are seeing significant growth in altcoins, even though BTC is under constant downward pressure, and any hint of pessimism was enough for market participants to start selling their assets in an attempt to make a profit or cut losses. High volatility and sudden price shocks also mean that many large traders are closing. Long leverage, which leads to big losses and a sharp drop in prices. ”
Another factor contributing to the market crash was the intensification of bitcoin mining and trading in China. The news is part of a public initiative by the Prime Minister’s Commission on Financial Stability and Development to counter illegal securities activities in an effort to stabilize the stock market, bond markets and foreign exchange markets.

Among the many other coins that were affected, Ether (ETH), the dominant digital currency, also fell heavily in value. ETH hit an all-time high of $ 4,362 on May 12, but after the market carnage, the coin’s price fell to a 30-day low of $ 1,922 on May 23, causing prices to plunge 55%. In the subsequent bounce, the price rallied more than 35% to trade the $ 2,800 series.

It goes without saying that Bitcoin and Ether products dominate the cryptocurrency derivatives space due to the overwhelming importance of these tokens. Although the spot price of an asset is highly dependent on the futures market, unexpected price movements often result in large losses for the investors involved.

Collapse led to huge playoffs
The Bitcoin futures market experienced significant growth in 2021 along with an increase in the spot price. Open interest in exchange-traded bitcoin futures hit an all-time high of $ 27.68 billion on April 13. But amid market crashes, open interest fell nearly 58% to a 90-day low of $ 11 billion on May 23.

As the OKEx Insights team explained, “Approximately $ 8.61 billion in positions were settled through derivatives exchanges on Black Wednesday.” As a result, OI fell from $ 2.1 billion to $ 1.3 billion on OKEx. The spokesman added: “There has been no noticeable recovery in open interest so far, which indicates a lack of confidence in the market.”

Open interest in the bitcoin options market also saw a similar decline on May 23rd. It hit a 90-day low of $ 6.66 billion, 55% below its all-time high of $ 14.77 billion on March 18. Deribit, a crypto derivatives exchange manager, told Cointelegraph:

The crash in BTC and ETH triggered levels of implied volatility, which led to a sharp rise in option premiums. Market makers are adjusting prices as the sales volume exceeds the estimated volume. Since most of the large clients use our advanced portfolio margin system, liquidations usually do not occur at this high level as we provide security instead. ”
A look at the Deribit Implied Volatility Index (DVOL) provides insight into future volatility. It provides an annual 30-day volatility forecast. Strijers further explained how DVOL can be used as a commodity for the markets. He said: “DVOL could be a good indicator of impending disruptions. Around midnight Wednesday, before the decline, DVOL began to rise. ”

The decline in the price of BTC can be traced back to May 12, when the price of Bitcoin dropped below $ 50,000. An OKEx Insights spokesperson also commented on the operator, saying Musk’s tweet “caused a lot of fear in the cryptocurrency market,” adding: “The quarterly futures premium has dropped from 3.5% to less than 1%. This indicates that the futures market has overheated. ” Very careful and did not expect a huge rise in prices. “