Bitcoin Price Drop: 5 Crucial Factors Behind the 10.8% Decline
Bitcoin saw a large price dip, going down from $65,062 to $58,053, a 10.8% drop in the last two days. Ethereum also decreased significantly from $2,792 to $2,384, which is about a 14.5% decrease. A popular analytical platform CryptoQuant recently shared five charts that would shed light on why the cryptocurrency market reached this sudden low.
Short-term holders prove to be a significant barrier contributing to the most recent decline in the price per Bitcoin. Last week Bitcoins price fell significantly and Short-term investors were left with an average holding at a 17% loss closer to the start of the month. When the price reached its breakeven point, most of these holders cashed out creating a significant resistance that led to the next bear market.
In addition, speculation played a significant role in weakening the structure of the market. Since August 5th, the Open Interest in Bitcoin futures increased from $13.5 billion to $17.9 billion, which is up by 31% from the previous year.
Nonetheless, the funding rate was positive continuously which meant that the traders were willing and ready to pay the extra price for perpetual contracts allowing them spot prices to increase. Such uncertainty imparted volatility and potentially rendered the market more vulnerable to a downturn.
Bitcoin Inflows Increase Sell Pressure
Another contributor to the drop was the incoming flows of Bitcoin into spot exchanges despite declining prices. CryptoQuants verified author IT_Tech_PL pointed out the rising flows, which could mean that users plan to push through selling activity shortly. This put added pressure on an already volatile market, especially the futures contracts.
Julio Moreno, CryptoQuants Head of Research, pointed out that most of these inflows were coming from large addresses, which means that major market participants were transferring their funds to exchanges for sales.
Due to market fluctuations, there have been numerous bankruptcy cases, especially in Ethereum and Bitcoin. Ethereum long liquidations further scaled up to $55 million and Bitcoin long liquidations hit $90 million max since August 5th. Masses of traders were stopped from the market and thus Open Interest in the market fell by $2.2 billion, thus giving a further pull-down effect to the already declining figures.
The overall drop was due to a number of factors such as short-term holder sell-off, speculative activity, increase in spot Inflows, and a dominant wave of liquidation. All the above factors compounded up to result in an unstable market condition, hence the steep drop that was evident in both Bitcoin and Ethereum values.
Read more: https://www.tronweekly.com/bitcoin-price-drop-5-crucial-factors-behind-the/
Text source: TronWeekly
