The Bitcoin market has witnessed a significant downturn, with prices plummeting below the $66,000 mark. This abrupt -5.6% price movement can be attributed to four major factors: a long liquidation event, a rising US Dollar Index (DXY), profit-taking by investors, and spot Bitcoin ETF outflows.
#1 Long Liquidations
The main force leading to todayโs downturn in Bitcoinโs price was a significant deleveraging event characterized by an unusually high level of long liquidations. Before the downturn, Bitcoinโs Open Interest (OI) Weighted Funding Rate was unusually high, indicating that leveraged traders were paying premiums to maintain long positions in anticipation of future price increases. This optimism, however, made the market vulnerable to sudden corrections.
Crypto analyst Ted, known as @tedtalksmacro on X (formerly Twitter), remarked, โToday was the largest long liquidation event since the 19th March.โ He further elaborated on the effects of this correction by noting, โNice reset in overall positioning today, even on just a 5% drop lower for Bitcoinโฆ Next leg higher is loading I think.โ This comment highlights the severity of the liquidations and suggests a potential rebound or restructuring within the market as it stabilizes.
Coinglass data reveals that over the last 24 hours, 120,569 traders were liquidated, amounting to $395.53 million in total liquidations, with $311.97 million being long positions. Bitcoin-specific long liquidations were at $87.42 million.
#2 DXY Puts Pressure On Bitcoin
With 105.037, the DXY closed at its highest level since November yesterday, evidencing a strengthening US dollar. Given Bitcoinโs inverse correlation with the DXY, the stronger dollar might have shifted investor preference towards safer assets, moving away from riskier investments like Bitcoin.
This correlation stems from the global marketโs risk sentiment, where a rising DXY often signals a shift towards safer investments, detracting from riskier assets like Bitcoin. However, analyst Coosh Alemzadeh provided a counter perspective, suggesting through a Wyckoff redistribution schema that despite the DXYโs recent uptick, the next move could favor risk assets, potentially including Bitcoin.
#DXY โฌ๏ธ4 weeks in a row/broke out of its downtrend so consensus is that a new uptrend is starting yet risk assets are consolidating at ATH
Next move โฌ๏ธin risk assets on deck IMO pic.twitter.com/u6ORa76vkj
โ โCooshโ Alemzadeh (@AlemzadehC) April 2, 2024
#3 Profit Taking By Investors
Profit-taking by investors has also played a significant role in the recent price adjustments. The Bitcoin on-chain analysis platform Checkonchain reported a spike in profit-taking activities.
Glassnodeโs lead on-chain analyst, Checkmatey, shared insights via X, stating, โThe classic Bitcoin MVRV Ratio hits conditions we characterize as โheated, but not yet overcookedโ. MVRV = above +0.5sd but below +1sd. This indicates that the average BTC holder is sitting on a significant unrealized profit, prompting an uptick in spending.โ
The profit-taking coincided with Bitcoin reaching a peak of $73,000, marking a cycle high in profit realization with over 352,000 BTC sold for profit. This selling behavior is typical in bull markets but plays a crucial role in creating resistance levels at local price tops.
#4 Bitcoin ETF Outflows
Lastly, the market witnessed notable outflows from Bitcoin ETFs, marking a reversal from last weekโs substantial inflows. The total outflows amounted to $85.7 million in a single day, with Grayscaleโs GBTC experiencing the most significant withdrawal of $302 million.
Meanwhile, Blackrockโs IBIT and Fidelityโs FBTC reported positive inflows, totaling $165.9 million and $44 million, respectively. Commenting on this, WhalePanda remarked, โOverall negative day but not as negative as the price implied. Closing of Q1 so taking profit here makes sense. Some fuckery around [the] new quarter and halving is to be expected.โ
At press time, BTC traded at $66,647.
Featured image created with DALLยทE, chart from TradingView.com
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