The price of bitcoin has risen in the past few hours. Everything was going well for the last few days. BTC reached a high above $43K yesterday and it was testing the key resistance area near $44K.
Unfortunately, this was when the price declined and fell all the way to $38K (on Binance). As cryptopotato As reported earlier today, it saw over $700 million worth of liquidations in less than 24 hours.
Now, let’s take a look at three possible reasons that would have caused the market to go haywire.
Macro selloff and high correlation
The S&P 500 closed down 1.1% in yesterday’s trading session. The NASDAQ index is down 1.3% over the same time frame. The Dow Jones is down 0.89%.
If that’s not enough, the derivatives market also took a hit. CNBC reported that the Nasdaq 100 Futures Index fell after Netflix’s disappointing earnings report. Shares of the streaming giant fell more than 19% during an extended trading session on Thursday after the document came out, reflecting a slowdown in its subscriber growth.
The S&P 500’s yesterday was below 4,500 since October 18, 2021. Speaking on the matter was Scott Radler of T3 Live, who said:
The market has been showing faulty signals for the past few weeks and it seems as if the broader indices are finally breaking out.
Meanwhile, the price of bitcoin has been closely correlated with traditional indices, and the latest drop was no exception:
BTC exchange inflows surge before crash
One indicator of potential selling pressure is the total influx of BTC into exchanges. The more BTC that sits on exchanges, the higher the potential selling pressure usually.
data from crypto quant Turns out that the total exchange flow was increasing in the days leading up to the crash:
The number has been rising since January 16 and increased with the price, indicating that the BTC was transferred to exchange wallets with the intention of selling.
Place option on Deribit with highest open interest of $39K
As we reported in yesterday’s bitcoin price analysis, put options had the highest open interest for the $39K strike price on Deribit.
For the unaware, the put option profits when the price is low. On the other hand, the call had the highest open interest among the call options for the $44K strike price.
It is worth noting that there are approximately $538 million worth of bitcoin options contracts that will expire on Deribit today, and the maximum pain scenario would be at $43K if this happens.
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