- A massive sale of Bitcoin (BTC) on the Asian market caused the worst drop since ‘Black Thursday’.
- The funding rate on exchanges remains high and could support a new drop in the price of BTC.
Bitcoin continues to surprise investors. The cryptocurrency has had an explosive year start and its first big crash in months. After registering a new all-time high at $34,800 yesterday, BTC fell from $33,300 to $27,700 in only 4 hours. Analysts are perplexed and are discussing whether the bullish trend has reached its peak.
At the time of publication, Bitcoin price has managed to recover and stands at $31,100 with a loss of 11.53% on the last day. In the weekly chart, BTC registered a 15.42% gain, and in the monthly chart a 63% gain. Market capitalization also shows losses and has dropped to $562 billion.
The recent drop in the price of the benchmark cryptocurrency is considered its worst since March 2020, when “Black Thursday” occurred. At that time, the price of Bitcoin suffered a similar drop of $5,000 and reached $3,000 shortly after.
However, this time is different, as expressed by many experts today. In addition to the still strong fundamentals, the rapid recovery also shows the continued bullish sentiment in the market. Trader SalsaTekila pointed out that corrections of 30% and 40% were normal in the bull run of 2017. The fact that the price has recovered so quickly shows that new players have entered the market, buying up BTC cheaply.
In addition, Bitcoin’s price action appeared to have been motivated by a massive sell-off, driven by whales in the Asian market. The whales sold large amounts of BTC in the last few hours, according to analyst Joseph Young. About $100 million, or 3,000 BTC, was deposited on the Bithumb exchange. So, the sell-off could continue in the coming hours.
Young added that the bitcoin futures market is “overheated and crowded.” Glassnode data show that $190 million in Bitcoin futures contracts were liquidated on Binance’s derivatives platform in just 10 minutes. Traders appear to be operating with “super leverage,” as Young said.
CryptoQuant CEO Ki-Young Ju noted that the funding rate on exchange platforms has reached a record high for the first time since June 2016, standing at 0.14. According to this metric, traders have greater incentives to short BTC. This could be an indication of a continued correction in the coming days.
Young Ju advised investors to wait for the funding rate to “cool down” and stressed that the current market is “dangerous”. However, he did not rule out an increase in Bitcoin’s price due to increasing buying pressure from institutional buyers.
Bitcoin drops – do investors panic?
Meanwhile, the majority of investors and experts are not panicking. Byzantine Trader General and economist Alex Kruger agree that Bitcoin’s price development is healthy.
As Morgan Creek Digital co-founder Anthony Pompliano said, Bitcoin “only returned to its all-time high of last week”. On that note, Blockstream’s CSO, Samson Mow, took a look at the institutions that have and will be allocating capital to Bitcoin. Like Young Ju, Mow believes that the institutions will determine the price of Bitcoin in the short term.