bitcoin has recently experienced a notable drop, falling from a price above $64,000 on Monday to a low of $58,000 yesterday, marking a 10% decline in two days.
This sharp drop seems to have raised concerns among the crypto community, leading to various interpretations of market behavior.
A recent x.com/cryptoquant_com/status/1828707227231764909″ target=”_blank” rel=”noopener nofollow”>report CryptoQuant, an on-chain data provider platform, has highlighted five key factors that could have contributed to this decline.
Short-term holders and market fragility
CryptoQuant analysis highlights five critical charts that illustrate market conditions before and during the recent price drop.
One of the main factors identified by CryptoQuant is the role of short-term holders in creating a resistance level at its equilibrium price.
Earlier this month, the bitcoin price experienced another sharp drop, which left many short-term holders with an average loss of 17%. When the price recovered to its breakeven point, these holders took the opportunity to sell, creating resistance that prevented further upward movement.
In addition to the behavior of short-term holders, the report also highlights the fragile environment created by traders speculating on higher prices. Open interest in bitcoin futures increased from $13.5 billion to $17.9 billion, a 31% increase since August 5.
Notably, positive funding rates indicated a premium on perpetual contracts, reflecting traders’ expectations for prices to continue rising. However, CryptoQuant revealed that this optimism created a precarious situation where any negative price movement could trigger significant instability in traders’ positions.
Spot cash inflows and market settlements
The report also notes an increase in spot inflows during the price drop, suggesting that large holders were moving their bitcoins to exchanges, possibly to sell them. This additional selling pressure exacerbated fragile conditions in the futures market.
CryptoQuant revealed that as the price continued to fall, long positions in both bitcoin and ethereum were liquidated at high levels: $90 million for bitcoin and $55 million for ethereum.
These liquidations, the largest since August 5, reduced open interest by $2.2 billion, further destabilizing the market.
CryptoQuant concluded by noting:
That’s what happened with the recent price drop. For now, the market needs some time to stabilize and we should monitor the on-chain data in the coming days.
Meanwhile, the past 24 hours have been no different from the decline seen in the previous days. In particular, during this period, bitcoin has continued to fall.Currently down 3.2% and trading at $59,841 at the time of writing.
Featured image created with DALL-E, chart by TradingView
