As a researcher with experience in the cryptocurrency market, I believe that the recent sell-off in Bitcoin (BTC) was not driven by a “massive futures margin call” as some may have suggested. Instead, it appears to be a healthy de-leveraging process that has been ongoing since BTC’s latest all-time highs in mid-March.
According to recent assessments, Bitcoin’s (BTC) price dip to two-month lows did not trigger significant margin calls in the futures market.
On May 2nd, Checkmate, the primary on-chain expert at Glassnode, disclosed a significant shift occurring in Bitcoin’s bull market during a discussion on X (previously Twitter).
Analysis: Derivatives not “dominant” in BTC price sell-off
The surprise rise of Bitcoin to hit $56,500 on May 1 might have taken some investors by shock. However, from a wider perspective, this correction within the ongoing bull market could be considered beneficial for the overall market’s wellbeing.
I’ve observed a steady reduction in leverage among Bitcoin futures traders since Bitcoin reached its most recent peak in mid-March, according to Checkmate’s analysis. He believes this trend signifies the waning of “bull market excess.”
As a seasoned crypto investor who lived through the thrilling 2021 Bitcoin bull market, I can’t forget the cataclysmic derivatives-driven deleveraging incidents that ultimately brought an end to its meteoric rise.
“Are we seeing a derivatives led flush out today? I don’t think so.”
An accompanying chart compared the comedown from Bitcoin’s trip to $58,000 during Q1 2021.
Flat funding rates for derivatives have emerged as a notable difference between the current market landscape and that of three years ago, according to Checkmate’s reference.
“The funding rates have been easing down steadily rather than abruptly, indicating a healthy situation. This implies that there wasn’t a significant future margin call incident the previous day.”
After that, people shifted their focus towards other platforms for the most recent Bitcoin price drops, which at the moment of composition had barely bounced back above the depths.
“The thread pointed out that there were two notable instances of investors reducing their positions in Bitcoin futures markets before the recent price drop, as indicated by the chart showing the weekly changes in open interest.”
“We did hit two overheated points on the rally into the $73k ATH, but it cooled off quickly. Again, doesn’t feel like derivatives were the dominant factor in this Bitcoin sell-off.”
Bitcoin slides below ETF cost basis
Approximately $500 million was withdrawn from US Bitcoin ETFs for trading on the Bitcoin selling market on May 1.
As a researcher studying the cryptocurrency market, I’ve observed a significant selling pressure in response to recent Bitcoin price fluctuations. Notably, BlackRock’s iShares Bitcoin Trust (IBIT) experienced its largest single-day loss of approximately $40 million.
All ETF products exhibited a comparable trend, showing net outflows based on data from various sources, including Farside, a UK-based investment firm.
As a researcher analyzing bitcoin fund outflows, I discovered that Fidelity Wise Origin Bitcoin Fund (FBTC), managed by Fidelity Investments, recorded the largest withdrawal amounting to $191 million.
Mikybull Crypto, a well-known trader, posited that the Bitcoin price might instill greater fear among investors, causing a downturn, before bouncing back for further growth.
“IBIT experienced $36.9M its first-ever outflows since ETF approval due to the price currently being below the cost basis. Remember in every BTC bull cycle, good news always signals the top while bad news signals the bottom.”
As an analyst, I’ve observed a noteworthy shift in the cryptocurrency market sentiment based on recent developments. Specifically, the Crypto Fear & Greed Index has dipped to a level of 43 out of a possible 100, which marks its lowest point since last September. This reading signifies that the index is currently in “neutral” territory.
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2024-05-02 11:46