Here are three possible reasons for Bitcoin’s recent downturn as it reaches a 6-month low. Bitcoin’s price has taken a beating in the last few hours. Everything seemed to be going well over the past few days. btc spiked to a high above $43,000 yesterday and was testing a major resistance area around $44,000.
Unfortunately, the price was then rejected and fell all the way to $38,000. In less than 24 hours there were more than $700 million worth of liquidation positions.
Now, let’s look at three possible reasons why the market may have plummeted in price.
1. Macro sell-off and high correlation
The S&P 500 index closed down 1.1% yesterday. The Nasdaq fell 1.3% over the same period. The Dow Jones was down 0.89%.
If that wasn’t enough, the derivatives market also took a hit. CNBC reports that the Nasdaq 100 futures index plunged after Netflix reported disappointing earnings. Shares of the streaming giant fell more than 19 percent in Thursday’s extended trading session after the release of the document, indicating a slowdown in its subscriber growth.
The S&P 500 closed below 4,500 yesterday, its first close since Oct. 18, 2021.
For the past few weeks, the market has been flashing the wrong signals, as if the broader index is finally about to collapse.
Meanwhile, the price of bitcoin is closely correlated to the price of traditional indices, and the recent plunge is no exception: the
2. Increased Inflows to BTC Exchanges Prior to the Crash
One indicator of potential selling pressure is the total inflow of BTC on exchanges. The more BTC there is on an exchange, the greater the potential selling pressure is usually.
The data shows an upward trend in total exchange inflows during the days leading up to the crash: the
3. Total FX Inflows
This number has been rising since January 16 and has increased as the price has risen, indicating that BTC is being transferred to exchange wallets with the intention of selling.
BTC puts with a strike price of $39,000 have the highest positions among puts. For those who don’t know, puts take profits when the price falls. On the other hand, calls with a strike price of $44,000 have the highest positions among call options.
Notably, there are about $538 million worth of bitcoin options contracts expiring today, and the biggest pain scenario is for the price to reach $43,000 when that happens.
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