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Bitcoin drops below $7,000 level, bad OKEx trade possibly to blame

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After rebounding to over $8,500 over a week ago, the Bitcoin price has fallen back below the $7,000 mark as of Saturday (Aug. 4). The slide comes after Bitcoin fell about $600 to $7,500 this past Tuesday. It could also possibly retest a previous low of under $5,600 from earlier in July.

A report from Forbes indicated that Hong Kong exchange OKEx had to freeze a client’s account which had opened “an unusually large long position order” of 4,168,515 contracts this past Tuesday (July 31). The client’s position was said to be worth an estimated $420 million with each contract worth $100.

The exchange said they tried to contact the client several times recommending they close some of the positions to reduce overall risk. They were unsuccessful in getting the client to cooperate so they had to freeze the account to prevent further action.

After they took this action on the client’s account, the Bitcoin price saw a downturn and OKEx had to liquidate the account. This may have led to a further drop in BTC price as more of the digital currency was released to the market. That action happened as Bitcoin saw a plunge from $8,100 to $7,500 this past Tuesday. As the week continued, traders saw BTC’s price fluctuate from the $7,350 to $7,600 range.

Once Bitcoin had started back towards the $8,500 mark in late July, it had some traders bullish about the prospects of the cryptocurrency for the remainder of the year. However, the recent drops could be part of a further downtrend as per Forbes’ report. The digital currency had seen an all-time high of $20,000 back in December 2017 before it started to fall back to lower levels during the early months of 2018 into the summer.

Fundstrat Global Advisor Technical Strategist Rob Sluymer felt a pullback should happen once Bitcoin got to a resistance level of $8,591. Sluymer had a suggested support level of the $7,400 to $7,800 level. The recent dip below $7,000 may be mostly due to the events that occurred at the Hong Kong exchange and the news arriving later in the week, though.

In a report from Bitcoinist, they mentioned that OKEx will implement some policies for the future to prevent this sort of action from happening. In particular, they will use margin ration scaling so that traders have to put down larger down payments if they are going to open such high positions.

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