Bitcoin Price Tumbles Below $66,000: 4 Major Reasons

The Bitcoin market has experienced a substantial drop in price, falling below the $66,000 threshold. This unexpected 5.6% decrease in value can be linked to four key reasons: a prolonged period of liquidation, an escalating US Dollar Index (DXY), investors cashing out their profits, and a net withdrawal of funds from Bitcoin Spot ETFs.

#1 Long Liquidations

The primary cause for Bitcoin’s recent price drop was a major deleveraging process marked by an abnormally high number of long position liquidations. Previously, Bitcoin’s Open Interest (OI) and Funding Rate were higher than usual, suggesting that traders holding leveraged long positions were paying extra to keep them in expectation of price growth. However, this bullish sentiment left the market prone to sharp corrections.

Crypto expert Ted, also recognized as @tedtalksmacro on X (previously Twitter), commented, “Today saw a significant long position liquidation, the most considerable one since March 19th.” He went on to explain the implications of this correction by stating, “A welcome adjustment in market positions occurred today, even with just a 5% decrease in Bitcoin’s price… I believe the next phase of growth is approaching.” This statement underscores the extent of the liquidations and hints at a potential rebound or reorganization within the market as it regains balance.

Bitcoin Price Tumbles Below $66,000: 4 Major Reasons

According to data from Coinglass, approximately 120,569 traders faced liquidation over the past 24 hours, resulting in a total of $395.53 million being wiped out. Long positions accounted for around $311.97 million of these losses. Specifically related to Bitcoin, about $87.42 million was lost due to long position liquidations.

#2 DXY Puts Pressure On Bitcoin

Yesterday, the DXY index, which represents the U.S. dollar against six major currencies, ended at its highest point since November (105.037), indicating a stronger U.S. dollar. As Bitcoin tends to move in the opposite direction of the DXY, this strengthening dollar could have caused investors to favor safer assets over riskier ones like Bitcoin.

The connection between the rising DXY index and a decrease in riskier assets like Bitcoin is driven by the global market’s risk appetite. When the DXY goes up, investors typically seek out safer investments, causing demand for riskier assets to drop. However, analyst Coosh Alemzadeh proposes an alternative viewpoint based on the Wyckoff redistribution theory. He believes that despite the recent surge in the DXY index, there’s a possibility that the upcoming trend may favor risk assets, including Bitcoin.

For the past four weeks, the #DXY has defied its previous downtrend, causing many analysts to believe that an upward trend is emerging. However, risk assets are currently holding steady at their all-time highs (ATH). In simpler terms, the DXY’s recent improvement has some experts thinking a new uptrend is beginning, but other risky investments continue to remain strong and unchanged at their peak levels.

Next move in risk assets on deck IMO

— “Coosh” Alemzadeh (@AlemzadehC) April 2, 2024

#3 Profit Taking By Investors

Investors cashing in their profits have significantly influenced recent price fluctuations in Bitcoin, according to data from the analytics platform Checkonchain, which indicated an increase in such activities.

According to Glassnode’s principal on-chain analyst, Checkmatey, as expressed through X, the Bitcoin Market Value Realized Value Ratio (MVRV) has reached a stage we refer to as “warm but not yet burnt.” The MVRV ratio is above the average but below the standard deviation. This signifies that the typical Bitcoin holder currently enjoys a substantial profit, leading to an increase in spending behavior.

Bitcoin Price Tumbles Below $66,000: 4 Major Reasons

In the height of the bull market, Bitcoin hit an all-time high of $73,000, leading to significant profits being cashed out by investors, amounting to over 352,000 BTC. This common phenomenon in bull markets contributes to establishing resistance levels at each price peak.

#4 Bitcoin ETF Outflows

In the end, Bitcoin ETFs experienced large withdrawals from investors, signaling a change from last week’s substantial deposits. A total of $85.7 million was withdrawn in one day, with Grayscale’s GBTC seeing the biggest withdrawal at $302 million.

During the same period, Blackrock’s IBIT and Fidelity’s FBTC recorded inflows amounting to $165.9 million and $44 million respectively. In response, WhalePanda noted, “The overall sentiment was bearish but not as bad as the price suggested. The end of Q1 saw some investors taking profits. Anticipated manipulations around the new quarter and Bitcoin halving are to be expected.”

At press time, BTC traded at $66,647.

Bitcoin Price Tumbles Below $66,000: 4 Major Reasons

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2024-04-02 12:04