The Bitcoin market suffered a significant decline, with the price plummeting to below $66,000. This sudden price change of -5.6% can be attributed to four main factors: a prolonged liquidation event, a rise in the US dollar index (DXY), investor profit taking, and spot Bitcoin ETF outflows.
#1 Long liquidation
The main factor driving today's decline in Bitcoin prices was a significant deleveraging event characterized by an unusually high level of long-term liquidations. Before the economic downturn, Bitcoin's open interest (OI)-weighted funding rate was unusually high, indicating that leveraged traders were paying a premium to hold long positions in anticipation of future price increases. However, this optimism made the market vulnerable to sudden corrections.
Ted is a crypto analyst known as @tedtalksmacro on X (formerly Twitter). said, “Today was the largest long-term liquidation event since March 19th.” He further explained the impact of this correction, saying, “Even with Bitcoin down just 5%, the overall rankings were successfully reset today. “I think the next high will be loading,” he said, elaborating further. This comment underscores the seriousness of the liquidation and suggests that the market may recover or restructure as it stabilizes.
According to data from Coinglass, 120,569 traders liquidated in the past 24 hours, totaling $395.53 million in liquidations, of which $311.97 million were long positions. Bitcoin-specific long-term liquidation amount was $87.42 million.
#2 DXY puts pressure on Bitcoin
Yesterday, DXY closed at 105.037, its highest since November, demonstrating the dollar's strength. Given the inverse correlation between Bitcoin and DXY, a strong dollar may have shifted investor preferences away from riskier investments like Bitcoin and toward safer assets.
This correlation stems from global market risk sentiment, and a rise in DXY often signals a shift to safer investments, drawing attention away from riskier assets like Bitcoin. However, analyst Khush Alemzadeh says that despite the recent rally in DXY, through Wyckoff's redistribution scheme, the next move could potentially favor risk assets, including Bitcoin. suggested and offered a contrary perspective.
#DXY ⬆️The consensus is that risk assets are consolidating at ATH, although a new uptrend has started as it has broken out of a 4-week consecutive/downtrend.
Next move ⬆️Risk assets on deck IMO pic.twitter.com/u6ORa76vkj
— “Kush” Alemzadeh (@AlemzadehC) April 2, 2024
#3 Profit taking by investors
Investor profit-taking has also played an important role in the recent price correction. Bitcoin on-chain analysis platform Checkonchain report A surge in profit-taking activity.
Checkmatey, Lead On-Chain Analyst at Glassnode, shared his insights via The condition has been met. MVRV = greater than +0.5sd but less than +1sd. This indicates that the average BTC holder is sitting on large amounts of unrealized gains, prompting increased spending. ”
The profit taking occurred at the same time Bitcoin reached a peak of $73,000, with over 352,000 BTC sold for profit, marking a cycle high for profit realization. This selling behavior is typical in bull markets and plays an important role in creating resistance levels at regional price highs.
#4 Bitcoin ETF outflow
Finally, the market has seen notable outflows from Bitcoin ETFs, a reversal from last week's significant inflows. Total outflows reached $85.7 million in one day, with Grayscale's GBTC experiencing the largest withdrawal of $302 million.
Meanwhile, BlackRock's IBIT and Fidelity's FBTC reported positive inflows totaling $165.9 million and $44 million, respectively. Comment from WhalePanda said“It was a negative day overall, but not as negative as the price suggests. The first quarter is over, so it makes sense to book profits here. Shit around. Bastard [the] New quarters and halvings are expected. ”
At the time of writing, BTC was trading at $66,647.
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