Why $30,000 is a critical price point for Bitcoin, and what happened the last time de-fi apps were massively selling the collateral they were holding? Why flash crash is inevitable if Bitcoin goes below $30,000? Here are the answers.
First, a flash crash will be happening the moment Bitcoin hits $29,900, due to the way de-fi lending apps are working. As per their contractual terms, a borrower must cover with more collateral any open position when the uncovered part of the loan hits a certain threshold. If they don't, then their collateral is sold to the open market.
This is what happened when Bitcoin first hit $39,900. Borrowers that couldn't add more collateral, saw their Bitcoins going to sale. But when this happens en-masse, you get what happened on May 19th, at noon GMT: within 90 minutes, Bitcoin went from $39,900 to $30,000. Back in May though, we were at the beginning of the devaluation phase, and buyers were still optimistic that the market would recover - that's how Bitcoin went back to $40,000 within another 90 minutes. One month later, if de-fi apps start selling again en-masse below $30,000, recovery may be less likely to happen.
