Bitcoin
BTC$29 971.34

-2.51%

Ethereum
ETH$2 037.32

-2.77%

Tether
USDT$0.998813

0.01%

USD Coin
USDC$1.000215

0%

Binance Coin
BNB$300.71

-0.87%

XRP
XRP$0.429229

-2.87%

Reasons Bitcoin abruptly dropped by 7.4% overnight


20 Jan 2021

#Bitcoin

The price of Bitcoin (BTC) dropped sharply from $37,800 to $35,000 overnight, liquidating $572 million worth of cryptocurrency futures positions. There are three major reasons why the price of Bitcoin declined steeply in the past 12 hours. The reasons are an overheated derivatives market, growing doubt in the market, and the lack of upside volatility. Before the pullback occurred, the Bitcoin derivatives market was extremely overheated. The futures funding rate was hovering at around 0.1%, which is 10 times higher than the average 0.01%.

The futures funding rate is a mechanism that achieves balance in the futures market by incentivizing long or short contract holders based on market sentiment. If there are more long contracts or buyers in the market, then the funding rate turns positive. If it becomes positive, then buyers have to compensate short-sellers with a portion of their contracts every eight hours, and vice versa.

Almost all major cryptocurrencies saw their funding rates spike to around 0.1% to 0.3%, which meant the market was extremely overleveraged. When the market is this overcrowded, the likelihood of a long squeeze increases, which could cause many futures contracts to get liquidated in a short period. According to researchers at Santiment, there is “trader doubt” in the market on whether BTC would hit $40,00 again. They wrote:

“Thinking face There is an increasing amount of trader doubt that #Bitcoin will revisit $40,000. But according to address activity and trade volume, the long-term trend still looks plenty healthy. Keep a close eye on whether $BTC’s usage rate stays propped up.”

The fundamentals of the Bitcoin blockchain network, such as address activity and trade volume, remain strong. However, the market sentiment has dwindled in the past week as BTC continues to struggle to break out of the $38,000 resistance area.

Source


Related

Has Bitcoin reached the bottom?
Has Bitcoin reached the bottom?
Bitcoin's Price Plunges Below $34,000
Bitcoin's Price Plunges Below $34,000
Bitcoin stabilised but has trouble to reverse strongly
Bitcoin stabilised but has trouble to reverse strongly
Bitcoin will fall until the bulls capitulate
Bitcoin will fall until the bulls capitulate
The culmination of the battle for the trend in Bitcoin
The culmination of the battle for the trend in Bitcoin
Bitcoin undecided on a scenario for May
Bitcoin undecided on a scenario for May
Bitcoin: How the $1 million rally begins
Bitcoin: How the $1 million rally begins
Bitcoin's last hope for $38K
Bitcoin's last hope for $38K
Bitcoin slips to the lows of the year
Bitcoin slips to the lows of the year

Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap 7d price change
1 Bitcoin (BTC) BTC Bitcoin predictions 65.6% 75 $29 971.34 -2.51% -3.34% $570 710 962 296 BTC 7 days price change
2 Ethereum (ETH) ETH Ethereum predictions 64.4% 77 $2 037.32 -2.77% -12.22% $246 123 619 581 ETH 7 days price change
3 Tether (USDT) USDT Tether predictions 92% 1 $0.998813 0.01% -0.12% $75 662 238 918 USDT 7 days price change
4 USD Coin (USDC) USDC USD Coin predictions 91.2% 1 $1.000215 0% 0.02% $52 058 478 750 USDC 7 days price change
5 Binance Coin (BNB) BNB Binance Coin predictions 67.6% 71 $300.71 -0.87% -2.82% $49 099 184 129 BNB 7 days price change
6 XRP (XRP) XRP XRP predictions 65.6% 70 $0.429229 -2.87% -14.84% $20 750 274 438 XRP 7 days price change
7 Cardano (ADA) ADA Cardano predictions 65.2% 68 $0.563146 -3.78% -12.00% $18 999 983 515 ADA 7 days price change
8 Solana (SOL) SOL Solana predictions 59.6% 80 $54.72 -2.90% -15.35% $18 451 594 485 SOL 7 days price change
9 Binance USD (BUSD) BUSD Binance USD predictions 92.8% 1 $1.001783 -0.02% 0.32% $18 030 157 670 BUSD 7 days price change
10 Dogecoin (DOGE) DOGE Dogecoin predictions 64% 76 $0.089389 -1.42% -16.39% $11 859 333 710 DOGE 7 days price change
11 Polkadot (DOT) DOT Polkadot predictions 60.8% 77 $10.82 -4.42% -2.27% $10 689 096 556 DOT 7 days price change
12 Avalanche (AVAX) AVAX Avalanche predictions 64.8% 79 $33.60 -3.32% -21.39% $9 041 716 187 AVAX 7 days price change
13 Wrapped Bitcoin (WBTC) WBTC Wrapped Bitcoin predictions 65.2% 75 $29 975.26 -2.44% -3.38% $8 513 091 805 WBTC 7 days price change
14 TRON (TRX) TRX TRON predictions 70.4% 61 $0.069582 -1.95% -10.36% $6 803 114 078 TRX 7 days price change
15 SHIBA INU (SHIB) SHIB SHIBA INU predictions 62% 78 $0.000012 -1.75% -15.57% $6 768 218 149 SHIB 7 days price change

Be the first to receive Cryptocurrency Price Predictions and Forecasts daily

Get cryptocurrency price predictions, forecasts with analysis and news right to your inbox.

© 2015-2022 Crypto-Rating.com

The usage of this website constitutes acceptance of the following legal information. Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website, including information about the cryptocurrencies and bitcoin is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Crypto Rating shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about cryptocurrencies. The entire responsibility for the contents rests with the authors. Reprint of the materials is available only with the permission of the editorial staff.