Bitcoin prices have plummeted below $66,000, causing a major downturn in the market. Four major factors can explain the sudden price drop of -5.6%: long liquidation events, rising US Dollar Indexes (DXY), investors taking profits, and Bitcoin ETF spot outflows.
#1 Long Liquidations
Bitcoin’s current price decline is primarily due to a major drop in demand. deleveraging event A high number of liquidations is a characteristic that stands out. Bitcoin’s OI (Open Interest) Weighted funding rate was abnormally high before the downturn. This indicated that traders who were using leverage paid premiums in order to hold long positions, anticipating future price rises. Markets were vulnerable because of this optimism.
Crypto analyst Ted is known as @tedtalksmacro (formerly Twitter) on X. remarked, “Today was the largest long liquidation event since the 19th March.” Further, he elaborated the effect of this correction. “Nice reset in overall positioning today, even on just a 5% drop lower for Bitcoin… Next leg higher is loading I think.” This comment emphasizes the seriousness of liquidations, and implies a potential recovery or restructuring in the market when it stabilizes.
Coinglass data shows that 120 569 traders liquidated in the last 24 hour, which amounted to $395.53 Million total liquidation, $311.97 Million of it being for long positions. Long liquidations of Bitcoin were $87.42 millions.
DXY Pressure on Bitcoin
The DXY reached its highest closing level since last November with 105.037. This is a sign of a stronger US dollar. Bitcoin is a popular cryptocurrency. inverse correlation The stronger dollar may have led investors to prefer safer investments, such as Bitcoin, and away from more risky ones.
It is a result of the risk-sensitivities in the global markets. When DXY rises, it often indicates a move towards more secure investments and away from Bitcoin. Analyst Coosh alemzadeh offered a different perspective. He suggested that through the Wyckoff distribution schema, despite recent DXY gains, Bitcoin is still a riskier asset. next Bitcoin, for example, could benefit from the new policy.
#DXY ⬆️Risk assets consolidate at ATH despite 4 consecutive weeks of uptrends.
Next move ⬆️in risk assets on deck IMO pic.twitter.com/u6ORa76vkj
— “Coosh” Alemzadeh (@AlemzadehC) April 2, 2024
Investors are prone to profit-taking.
The recent price fluctuations have also been influenced by profit-taking. Checkonchain is a platform for Bitcoin chain analysis. reported Profit-taking activity increases.
Glassnode’s Lead On-Chain Analyst, Checkmatey has shared some insights with X. “The classic Bitcoin MVRV Ratio hits conditions we characterize as ‘heated, but not yet overcooked’. MVRV = above +0.5sd but below +1sd. This indicates that the average BTC holder is sitting on a significant unrealized profit, prompting an uptick in spending.”
Profit-taking occurred at the same time that Bitcoin reached a high of $73,000. This marked a new cycle record in terms of profit realisation, with 352,000 BTC being sold. It is common for bull markets to sell at top prices. This behavior plays an important role in creating local resistance levels.
Fourth Bitcoin ETF outflows
The market saw notable outflows of Bitcoin ETFs. This is a significant reversal since last week’s substantial inflows. Grayscale’s GBTC experienced the biggest withdrawal, amounting to $302,000,000.
Blackrock IBIT reported positive flows of $165.9 and $44 millions, respectively. WhalePanda commented on the matter. remarked, “Overall negative day but not as negative as the price implied. Closing of Q1 so taking profit here makes sense. Some fuckery around [the] new quarter and halving is to be expected.”
BTC was trading at $66,647 as of the time this article went to press.
Featured image created with DALL·E, chart from TradingView.com
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