Bitrabo Editorial
Bitcoin has experienced a significant decline, falling from over $64,000 on Monday to as low as $58,000 yesterday, representing a 10% decrease within a span of two days.
This sudden downturn has sparked concern within the cryptocurrency community, triggering various interpretations of the market behavior.
A recent report by CryptoQuant, an on-chain data provider platform, has outlined five key factors that may have played a role in this downturn.
The Impact of Short-Term Holders and Market Fragility
CryptoQuant’s analysis presents five crucial charts that depict the market conditions before and during the recent price drop.
One key factor highlighted by CryptoQuant is the influence of short-term holders in establishing a resistance level at their break-even price.
In a previous notable drop in Bitcoin’s price earlier this month, many short-term holders incurred an average loss of 17%. As the price recovered to their break-even point, these holders took the opportunity to sell their holdings, creating resistance that hindered any significant upward movement.
Additionally, the report points out the delicate situation created by traders speculating on higher prices. There was a 31% increase in open interest in Bitcoin futures, reaching $17.9 billion from $13.5 billion since August 5th.
Despite positive funding rates indicating a premium on perpetual contracts, signaling traders’ anticipation of further price hikes, this optimism led to a precarious scenario where any negative price movement could trigger substantial instability in traders’ positions.
Spot Inflows and Market Liquidations
The report also indicates a rise in spot inflows during the price decline, indicating that significant holders were transferring their Bitcoin to exchanges, potentially for selling purposes. This additional selling pressure exacerbated the fragile state of the futures market.
CryptoQuant further revealed that as the price continued to fall, there were significant liquidations of long positions in both Bitcoin and Ethereum at high levels—$90 million for Bitcoin and $55 million for Ethereum.
These liquidations, the highest since August 5th, resulted in a $2.2 billion reduction in open interest, further unsettling the market.
In conclusion, CryptoQuant emphasized the need for the market to stabilize and recommended monitoring on-chain data in the upcoming days.
Despite the ongoing decline over the past 24 hours, with Bitcoin currently down by 3.2% and trading at $59,841 at the time of writing, the situation remains fluid.