The reason why Bitcoin plummeted by more than $10,000 has been found

Huobi data showed that Bitcoin plummeted to around $30,400 yesterday, a drop of more than $10,000 from its high of nearly $42,000. The direct consequence was a surge in the number of people and the amount of liquidation. As for the reasons behind the "flash crash", I believe many investors did not have time to react.

Jason Lau, chief operating officer of San Francisco-based cryptocurrency exchange OKCoin, said the derivatives market exacerbated bitcoin’s decline. “There has been a long-standing squeeze on highly leveraged derivatives positions that has been going on across the market,” Lau told CoinDesk.
Sunday was by far the biggest day of liquidations in three months, with Binance alone processing more than $500 million in long liquidations, the crypto version of margin calls, according to data aggregator Bybt.

Total Bitcoin liquidations for major venues over the past month. The green line is long liquidations, red is sells, and orange is the BTC spot price.
Source: Bieber However, according to some market observers, the Bitcoin sell-off is not necessarily a bad thing for the cryptocurrency.
“Today’s drop should be viewed as a healthy correction by smart institutions buying BTC from $20,000 to $30,000,” said David Lifchitz, chief investment officer at quantitative firm ExoAlpha. “One of the worrisome signals we’ve discussed with investors is not that the price of Bitcoin is moving, but the velocity of Bitcoin, how quickly it’s moving, and how much it’s moving on a daily basis.”
Indeed, volatility was amplified by Bitcoin’s massive price surge and subsequent decline on Monday, which pushed the 30-day volatility indicator for the world’s oldest cryptocurrency to 71.9%, the highest level since June 5, 2020.
Bitcoin's 30-day volatility over the past year.
Source: Shuai Shuai/CoinDesk Research
Despite the decline, Rupert Douglas, head of institutional sales at cryptocurrency custody provider Koine, remains firmly bullish. “The market has doubled from its previous high in a matter of weeks,” Douglas said. “The market is behaving very abnormally (but) I think we’re going to go much higher, over $500,000 by 2023.”
While this is a pretty big claim for Bitcoin’s future price, Douglas also pointed out Bitcoin’s notorious volatility. “There will be sharp reversals along the way, so buy the dips, not the rallies.”
Options traders appear to be hovering, like crows seeking out shiny objects, on the possibility that the asset could fall further. The largest open interest in the ether options market on Sunday was at a strike price of $400, followed by $480 and then $800, according to data analytics firm Skew.

Denis Vinokourov, head of research at cryptocurrency brokerage Bequant, also noted that traders may hold at least some open interest in call options to hedge these bets, which gives buyers the right to buy at $1,920 but without the obligation. "The January 29 $1,920 call option was particularly active today compared to other options. This suggests that the second-largest crypto asset has seen strong dip buying again." (Unicorn Finance)