The price of Bitcoin (BTC) fell from $9,800 to as low as $9,200 on major exchanges overnight. It comes after BTC demonstrated relatively low volatility in the past week, ranging in between $9,900 and $9,500.

The sudden short-term price drop can generally be attributed to five major factors: a cascade of liquidations on BitMEX, whales seeking liquidity at near support levels, an uptick in miner selling and the rapid growth of the options market.

Cascading liquidations on BitMEX

In the last 18 hours, around $53 million worth of longs were liquidated on BitMEX alone. It indicates traders were largely expecting the price of Bitcoin to reclaim the $10,000 resistance level in the near-term.

Instead, the price of Bitcoin rejected $9,800 with a heavy sell-off, taking BTC down to around $9,300 initially within a span of an hour.

Total Bitcoin liquidations in the last three days. Source: Skew

There is a high level of selling pressure in the high-$9,000 area because traders are actively moving to hedge their positions in case of a deep pullback.

Cryptocurrency trader Koroush AK wrote:

For the past week we've been bouncing between ~$9850 and ~$9250 with slight deviations. Good levels to play if you like a good range. $9850 is preceded by several HTF resistances but after ~$10500 we should see fireworks. Should $9250 break I expect mid $8000s.

In April 2020, it took around 38 days for Bitcoin to rally from $5,800 to $7,700. But, it took less than 9 days for Bitcoin to surge from $7,700 to $10,000.

Comparison of Bitcoin price action from $5,800 to $7,700 and $7,700 to $10k. Source: Tradingview

Technically, there is little resistance or support between $7,700 to $9,100. Traders are seemingly cautious about a further downtrend because of the weak technical structure between the price range.

Whales using the false Satoshi narrative to seek liquidity

As Cointelegraph extensively reported on May 20, an individual moved 50 BTC from a wallet that dates back to February 2009.

The 50 BTC was mined merely one month after the first Bitcoin block was mined, causing people to speculate if it was Satoshi Nakamoto.

But, from the absence of a Patoshi pattern to the existence of several early miners in 2009, almost all data points showed the sender was not Satoshi.

The lackluster data did not stop whales from using the narrative to stir up volatility in the market. As soon as the transaction was publicized, the price of Bitcoin dropped by 5% almost immediately. Whales were most likely adding selling pressure to take liquidity at low support levels.

An uptick in miners selling

According to data from ByteTree, the Miner's Rolling Inventory (MRI) is at 102.8%. If the MRI crosses around 80%, it shows miners are selling the BTC they mine, rather than holding onto it.

Miners sell BTC while on-chain data shows Bitcoin is overbought. Source: ByteTree

On May 20, the day the price of Bitcoin fell to $9,200, the net inventory of miners was -187 BTC. Given that miners mine up to 900 BTC post-halving, they sold more than they mined on the day.

The recent trend of miners selling more BTC than before the halving occurred on May 11 may add persistent selling pressure on BTC throughout the near-term.

Rising USDT withdrawals

On-chain data from Glassnode shows the number of Tether (USDT) exchange withdrawals reached an all-time high.

Tether is widely utilized as an alternative to digital cash, especially in regions with restrictive access to the cryptocurrency exchange market, such as China.

Outflow of Tether (USDT) from cryptocurrency exchanges. Source: glassnode

The outflow of Tether from exchanges suggests two things: the number of sellers in the market is on the rise and the number of Chinese buyers may be on the decline.

Glassnode said:

“USDT Number of Exchange Withdrawals (1d MA) just reached an ATH of 2,083.37. Previous ATH of 2,075.792 was observed on 30 April 2020.”

The options market is expanding, fueling volatility

The Bitcoin options market is expanding at a rapid rate, with Deribit reaching a billion dollars in open interest.

Unlike futures and spot prices that are relatively easy for both long-time traders and beginners to navigate, options contracts are conceptually more complex than the two. As such, options appeal to professional and full-time traders over casual traders.

With options being one of the three big markets alongside spot and futures, the volatility of BTC and the diversity of investors within the market is increasing. In the near future, the options market is likely to have more impact on the price trend of BTC.