Quick overview

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Bitcoin fell 8% to reach a low of $81.3K before making a minor comeback on Friday morning. There were $1.7 billion in liquidated positions amid 7% drop in the overall cryptocurrency market capitalization.

Bitcoin’s open interest, which represents the total number of open positions, has abruptly increased since Wednesday. Options market investors are betting on a short-term crash to the $70,000 to $75,000 range, which hovers at -12 percent, indicating that investors are paying a premium for downside protection.

Both futures and spot cumulative volume delta showed a decline in the same period, confirming that Bitcoin’s decline was caused by combined selling pressure from perpetual and spot investors.

Overall, the markets anticipate a difficult beginning to February. He said that while the Clarity Act—currently being debated in the Senate—is a positive regulatory step for the industry, it is unlikely to drive prices higher in the short term

The correction was largely caused by changes in Washington policy, such as President Donald Trump’s declaration that he would name his next nominee for Federal Reserve Chairman on Friday.

Sources familiar with the situation told Reuters that former Fed Governor Kevin Warsh met with President Trump at the White House on Thursday and reportedly “impressed” the President, though nothing is final until an official announcement is made, which is anticipated later this morning.

Market players anticipate that Kevin Warsh, a longtime opponent of quantitative easing and likely inflation hawk, will take over as chair. The short-term outlook for Bitcoin is negative due to Trump’s executive order declaring a national emergency on Thursday.