As an experienced analyst, I believe that this recent Bitcoin crash was a necessary purging of the market from leveraged speculators. The market has been heavily futures-driven for a long time, and it was essential to reset the market structure and decrease reliance on futures contracts.
At the current moment, Bitcoin is facing significant selling pressure and is struggling to hold its ground. Following a downward trend for the past two days, the price has failed to surpass the $63,000 mark and instead plummeted below previous support levels from May 2021.
BTC Drop Purging Speculators, Markets Shifting To Spot Trading
As a concerned crypto investor, I’ve noticed the recent market turmoil that has set in following this latest wave of liquidations. However, one analyst, Ki Young Ju, founder of CryptoQuant, took to social media to offer some perspective. In his opinion, the Bitcoin market has been heavily influenced by futures trading for an extended period.
Despite the decline in Bitcoin’s price since the 2024 bull market, Ju believes that the market correction was essential for removing excessive leverage among speculators seeking profit from market instability. Instead of relying on Bitcoin as a means to address underlying issues, these investors focused primarily on capitalizing on volatility.
Starting from July 4th, the founder reported a decrease of 63% in the ratio of futures trading volume compared to the 2021 peak. This reduction suggests a positive change in market dynamics, where traders are relying less on futures contracts and instead opting for holding Bitcoin outright, rather than actively trading it for profit.
After the sudden drop in Bitcoin’s price below $54,000 caused a flash crash, approximately hundreds of millions of dollars worth of leveraged long positions were forcefully closed down on various trading platforms. As a result, numerous bullish investors took heavy losses and were left disheartened upon examining their account balances.
As a crypto investor, I’ve noticed some significant liquidation events based on the latest data from Coinglass. Specifically, approximately $323 million in leveraged long positions were closed on July 5. On the other hand, only around $121 million in shorts got forcefully liquidated during the same timeframe.
The majority of these open positions were started on Binance and OKX, two prominent global crypto platforms that offer both spot market trading and perpetual futures contracts.
Bitcoin Market Maturing, ETFs Game-changing
As a researcher studying trends in the Bitcoin market, I’ve come across Ju’s post where they mentioned the potential reason for the increase in spot trading over futures could be attributed to the influence of spot Bitcoin exchange-traded funds (ETFs). Based on current evaluations, approximately a quarter of the total capital influx into spot trading volume originates from ETF issuers.
In contrast to the past when retailers held significant market power, this new infusion of funds is “more robust and developed” than ever. Consequently, rather than succumbing to price drops like in the past, these investors are expected to maintain their positions, possessing greater financial strength to weather any pressure.
As Bitcoin continues to develop, an increasing number of institutions and major corporations are expected to imitate MicroStrategy and Tesla’s moves by investing in Bitcoin as part of their broad, multi-trillion dollar investment strategies. By the beginning of July, Bitcoin ETF providers have already acquired billions of dollars’ worth of Bitcoin on behalf of their clients.
As a researcher investigating recent Bitcoin exchange-traded fund (ETF) activity, I’ve found that there have been net outflows based on the current market price trend. Specifically, according to Lookonchain, as of July 5th, these nine ETFs collectively added 166 BTC to their holdings. Among them, Fidelity was the largest contributor, purchasing approximately 105 BTC.
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2024-07-06 14:45