Bitcoin Market Experiences Sharp Downturn, Dropping Below $66,000
The Bitcoin market has faced a pronounced decrease, with values plummeting below the $66,000 mark. This -5.6% slump is attributed to a blend of factors including a significant long liquidation event, the strengthening of the US Dollar Index (DXY), increased profit-taking by investors, and notable outflows from spot Bitcoin ETFs.
A foremost cause for the dip in Bitcoin prices is a considerable deleveraging incident characterized by an uptick in long liquidations. The Bitcoin Open Interest (OI) Weighted Funding Rate previously reached peaks, suggesting an optimism among leveraged traders expecting price ascents. This overly positive sentiment rendered the market prone to abrupt downturns.
Recent data reveals that 120,569 traders were liquidated in the past 24 hours, leading to a total of $395.53 million in liquidations. Out of these, $311.97 million were long positions, with Bitcoin-specific long liquidations adding up to $87.42 million.
The US Dollar Index's climb to its highest point since November highlights a burgeoning US dollar. Typically, Bitcoin and the DXY exhibit an inverse connection, hinting that the dollar's gain could divert investor interest towards more stable assets, sidelining riskier bets like Bitcoin. However, some analysts speculate that despite the DXY's surge, the next turn might benefit risk assets like Bitcoin.
Profit-taking by investors also played a pivotal role in the recent price alterations. As Bitcoin hit the cycle peak of $73,000, data from a Bitcoin on-chain analysis platform indicated a surge in profit-taking, resulting in over 352,000 BTC being sold. This selling spree is a common phenomenon in bull markets, yet it significantly contributes to establishing resistance levels at local peak prices.
Moreover, a marked shift was observed with significant outflows from Bitcoin ETFs, deviating from the impressive inflows the earlier week, amounting to daily outflows of $85.7 million. Nevertheless, some ETFs have reported positive inflows amidst this trend.
At present, BTC is valued at $66,647, a figure reflecting the multifaceted pressures impacting the cryptocurrency market. Despite these short-term obstacles, the inherent volatility of Bitcoin often translates to swift recoveries, keeping investor interest alive in the longer term.
Analyst comment
Negative news. The Bitcoin market has experienced a sharp downturn, dropping below $66,000 (-5.6%). Factors such as long liquidation events, strengthening of the US Dollar Index, profit-taking by investors, and outflows from spot Bitcoin ETFs contribute to the decline. In the short term, the market is expected to face challenges, but the inherent volatility of Bitcoin suggests potential for swift recoveries in the longer term.
