Bitcoin price is plummeting! Even though volume is still relatively low, that level is now approaching the key support level near $66,000. This suggests that buyers are skeptical about future price trends, forcing traders to consider whether to buy or sell Bitcoin. As a result, prices began to fall due to reduced purchasing activity. This may cause alarm as key factors have contributed to the recent BTC price decline.
High funding and open interest
The funding rate is nothing but a fee set by the exchange to maintain a balance between the contract price and the spot BTC price. Fluctuations in funding rates have a significant impact on prices. Negative interest rates occur when the future contract price is less than the spot price. Negative interest rates indicate that the market is likely in a downtrend.
However, the current scenario is manifold as the rates are quite high, indicating that traders are willing to pay more money to maintain their long positions. This also indicates that there are many leveraged positions in the market and that whales and large holders may take advantage of them. They can cause price declines by selling their holdings, which can further lead to a series of liquidations among leveraged traders.
Increase grayscale spill
Since the Spot Bitcoin ETF was launched, its price has soared due to increased capital inflows. This was also the main reason why BTC price pushed the new ATH formation near his $74,000 mark. Moreover, one of his leading investment companies, BlackRock, quickly accumulated over 100,000 BTC in just a few months, making market participants optimistic about the price. Additionally, Grayscale Bitcoin Trust (GBTC) is a popular investment vehicle for institutional investors to gain exposure to Bitcoin.
The bears have shown significant strength since BTC price marked a new ATH of $73,800. One of the main reasons is the significant outflow from grayscale, which indicates a reduction in institutional demand. This is having a negative impact on the price as the bulls remain passive, paving the way for the bears to increase their bearish pressure.
Also read: Crypto market crash: Top 5 altcoins to buy this dip
historical precedent
Historical patterns in Bitcoin prices suggest that the token has a history of experiencing price corrections prior to halving events. Halving occurs approximately once every four years and reduces your reward in half. This will reduce new issuance of tokens and have a positive impact on BTC price.
This expectation may cause some investors to sell their holdings in anticipation of a price correction. However, this correction may be short-lived and could lead to a significant increase in Bitcoin (BTC) price in the coming days.
