What Pushed Bitcoin’s Price Down by Over 10%? Here Are A Couple of Reasons Why
Already, BTC price is back above $57k, after its fall to nearly $54,500, which came following the new peak above $61,700.
Bitcoin futures open interest (OI) hit a new all-time high in USD terms at $23 billion, on the back of the BTC price surging to about $61,700 on Saturday.
Meanwhile, the leadership in bitcoin futures OI is frequently changing, which was dominated initially by BitMEX up until the end of last year when the CFTC and DOJ charged it with illegally operating a cryptocurrency derivatives trading platform and anti-money laundering violations.
OKEx soon replaced BitMEX, only for CME to take the lead. Binance is currently leading the market in bitcoin OI at $3.71 billion, followed by Bybit, OKEx, and CME, as per data provider Skew. As for the bitcoin futures volumes, Binance is also leading here with $26.5 billion, followed by Huobi, Bybit, OKEx, and FTX.
Bitcoin futures volume on CME is also moving close in line with the spot BTC market.
— skew (@skewdotcom) March 15, 2021
As Bitcoin entered into the new week, the crypto asset dropped to nearly $54,500. This weakness could be due to a Reuters report that India would put a blanket ban on cryptocurrencies.
But “because (bitcoin is) decentralized, government bans or acceptance is somewhat irrelevant,” said Seth Melamed, the Tokyo-based chief operating officer of cryptocurrency exchange, Liquid. “Capital will find a way.”
Moreover, this is just another FUD during the bull market as the Finance Minister of the country has already said that India is not banning crypto. Nirmala Sitharaman said,
“From our side, we are very clear that we are not shutting all options. We will allow certain windows for people to do experiments on the blockchain, bitcoins, or cryptocurrency.
India will not ban crypto. Instead it will allow Indians to experiment with this new financial internet. We await specifics, but this is positive news from India’s tech-savvy Finance Minister, @nsitharaman.
Now to build and invest, to benefit all! pic.twitter.com/bXcFrDeHkB
— balajis.com (@balajis) March 14, 2021
The losses in the crypto market, which is “derivatives heavy,” also get exacerbated because of the use of too-much leverage. Just like the short squeezes send the market higher, the long liquidations increase the pain as well.
In the past 24 hours, 180,335 traders were liquidated for $2.22 billion.
Another factor that might have played a part in this 11.5% drop could be a big Bitcoin inflow to the Gemini crypto exchange. However, the funds were “simply transferred internally,” clarified data provider Glassnode. Trader CL commented on the on-chain data,
“Miners can sell and hedge in countless ways; they literally get paid $ to sell on futures, they can hedge on options, they can go to trading/otc desks. Imagine thinking miners are actively broadcasting it to you on a public ledger so you can short before they sell.”
If you are a whale and want to sell, you go OTC.
If you want to psyop and manipulate, you deposit on exchanges.
On-chain has become a huge marketing channel.
— Lex Moskovski (@mskvsk) March 15, 2021
As for the stock market, whose correlation with bitcoin has been high since last month, S&P 500 is aiming for the ATH hit Thursday last week. Tech-heavy Nasdaq is also on the rise but still down 5.5% from its February peak.
The markets can experience some volatility with the Federal Open Market Committee scheduled to meet on March 16 and 17, following the signing of a $1.9 trillion coronavirus fiscal relief package last week. The Bank of Japan is also set to hold its policy meeting later in the week.
Bond investors are also keeping an eye on whether the Fed alters its virtual zero interest rate outlook. Ahead of the meeting, US Treasury yields that have been on the rise since August dropped some, on 10-year Treasury bond yield fell to 1.618% and on 30-year Treasury note 2.385%, which moves inversely to prices.
While both the dollar and Treasury yields are on the uptrend, it is unlikely that the trend will continue for long. Richard Byworth, CEO of Nasdaq-listed digital asset financial services company Diginex Ltd., in an interview with Bloomberg, said,
“Even though the Fed may react in the short term with a brief uptick in rates that they're going to be pulling that back very very quickly.”