“Bitcoin no longer owes anyone”, but it only lasted for less than 5 seconds?
On the same night, at 23:00 on March 5, 2024, after three years of silence, Bitcoin once again hit $69,000 (based on OKX spot data), and the highest price once soared to $69,080, surpassing the $69,040.1 set on November 10, 2021, setting a new historical record.
Unlike the stable market after breaking through the $20,000 mark in 2020, Bitcoin did not remain strong after hitting a new high this time, but quickly turned to a rapid decline. The flash crash was surging. As of 3:55 am today, it fell to a low of 59,000 USDT, a drop of more than 14.5%. It has now rebounded to about 63,600 USDT.
At the same time, Ethereum also experienced a sharp decline from a high of 3821 USDT to a low of 3179 USDT in the early morning, a drop of 16.8%. The altcoin market was also hit hard. Except for L2/new public chain currencies such as STRK and APT, the callback of other currencies exceeded 10%.
According to Coinglass data, in the past 12 hours, the total amount of liquidation on the entire network exceeded US$900 million, of which long orders reached US$753 million, accounting for more than 83%. This completely presents a one-way slaughter of the long side, bringing a wave of leverage cleanup to the market. For overly aggressive investors, it is a passive lesson.
What are the reasons for the plunge?
"Look at houses and cars before going to bed, wake up and look at buildings and sea." Looking back at the short-term flash drop after this new high, when analyzing the possible reasons afterwards, it is not difficult to find that it may be the spillover of the US stock market at the macro level, and Bitcoin The result is the combined effect of internal factors such as large transactions of its own ETFs and abnormally high funding rates. These factors may have combined to contribute to this notable pullback.
US stocks plummet
At present, the attributes of Bitcoin as a risky asset are gradually becoming prominent, and its correlation with U.S. stocks is becoming increasingly close.
In the U.S. stock market overnight on Tuesday, the three major U.S. stock indexes generally fell, especially the sharp decline of blue-chip technology stocks, which caused the Nasdaq index to fall by more than 2% during the session, hitting a new low since February 21. At the same time, while Bitcoin hit a new high at 23:00 last night, the Nasdaq had fallen by more than 1% at the opening, showing that signs of risk were already evident at that time.
The long-term signal that deserves special attention is that the overall rise of chip stocks, which are regarded as one of the "pillars" of the US stock market and have been outperforming the overall market recently, has slowed down significantly recently. This has undoubtedly caused the market to worry about whether the AI boom can continue to provide a "booster" for the US stock market. This situation has to some extent increased the market's expectations for a possible correction in the US stock market in the future, causing many profitable funds to choose to avoid risks and adopt the strategy of closing positions or reducing leverage.
ETFs have huge turnover
It is worth noting that Bloomberg ETF analyst Eric Balchunas said that the total trading volume of 10 Bitcoin spot ETFs yesterday reached US$10 billion, about 5 times the recent average daily trading volume, setting a record high.
Daily trading volumes that are significantly higher than the average also represent a high turnover rate. This situation in which volatility and trading volume go hand in hand also indicates to a certain extent that under the sharp market fluctuations, some users' uncertainty and risk aversion about future trends are increasing, and some early chips choose to take profits in advance.
Abnormally high funding rates
While sentiment is rising, warning signs within the crypto market have been ringing for nearly a week.
As early as February 27, when Bitcoin hit a "new high in RMB", a market observation article pointed out that the most direct risk signals in the crypto market began to accumulate. Starting from 8:00 on February 27, the funding rate of perpetual contracts of Bitcoin and Ethereum once soared to an extremely high level of about 80%, indicating that long positions continued to spend a large amount of funding costs equivalent to an annualized 80%.
However, the market enthusiasm was far beyond expectations. In the following week, the funding rates of Bitcoin and Ethereum perpetual contracts remained high, basically maintaining in the high range of 50% to 70%. On February 5, the day of the market crash, the rates of Bitcoin and Ethereum reached an abnormal level of nearly 100%, which means that longs were heavily subsidizing shorts, constantly paying high long costs and losing funds.
Therefore, even the most determined bulls will find it difficult to escape the pressure of time. Once the battle line is extended, the positions may be closed quickly, and if the bulls are the first to close their positions and withdraw, it may trigger a domino effect, leading to a large leverage liquidation.
Ancient whale selling?
In addition, Bitcoin News tweeted after the crash that a large amount of bitcoin mined by an ancient whale address from August to October 2010 seemed to be sold after reaching a new high, "leading to Tuesday's price adjustment."
However, according to CryptoQuant statistics, Bitcoin, which has been dormant for more than 10 years, has been moving before reaching a new high, and the selling force of only tens of millions of dollars does not seem to be enough to cause the market to plummet by more than 15%.
Is the market peaking or is it a bull market correction?
“Three years ago, I was stuck with 69,000 USDT. Three years later, before I had the chance to get out of the trap, I was stuck with 69,000 USDT again.”
I believe the biggest question everyone is wondering right now is whether this sharp drop is a sign that the market has peaked, or is it a regular correction of the "bull market crash"?
We can still comprehensively review the current news and capital factors to help us make a more objective judgment on the market outlook.
Continued inflows of funds into ETFs and MicroStrategy
The primary factor remains the same old story. For Bitcoin, the largest incremental capital inflow at present is undoubtedly the spot ETF.
As of March 4, the total net asset value of the Bitcoin spot ETF was US$52.45 billion, the ETF net asset ratio (market value as a percentage of the total market value of Bitcoin) reached 3.96%, and the historical cumulative net inflow has reached US$7.91 billion.
In addition, MicroStrategy officially announced yesterday that it plans to issue convertible senior notes due in 2030 with a total principal amount of US$600 million through a private placement. The net proceeds are planned to be used to purchase additional Bitcoin and for general corporate purposes.
Market rates fell sharply
In the previous week mentioned above, the perpetual contract funding rates of Bitcoin and Ethereum have remained at abnormally high levels. The sharp drop from last night to this morning can be seen as a timely cooling, bringing the market back to rationality from the "FOMO" (fear of losing a job or missing out) sentiment.
From a data perspective, the current Bitcoin funding rate has dropped significantly to an annualized 24.85% (although it is still slightly higher than 10% a month ago). The funding rates of most altcoin trading platforms have also fallen back to the normal level of 0.01%, and the contract leverage risk has been released in the market.
Some people believe that "Bitcoin leads the market, and altcoins will follow later and are expected to experience a sharp correction - in the last bull market cycle, there were six corrections of more than 30%."
Although history will not repeat itself simply, it always follows a similar rhythm. Although this sharp drop is fierce, it can also be seen as releasing certain risks in advance, and we still have expectations for the subsequent market.
ON
Optimism (OP) has experienced a significant resurgence recently, a trend fueled by increased network usage following the integration of the Worldcoin (WLD) privacy token. At the end of 2023, OP token experienced good development due to the platform’s focus on decentralization and lower transaction fees. As of early 2024, nearly 90% of OP holders have made profits from their investments.
The market forecasts are optimistic about the price prospects of Optimism (OP), predicting that the price may rise to $10.62 next year. Various predictions for 2024 range from $4.48 to $7.59, showing confidence in the bullish future of OP tokens. This optimism is supported by the growing adoption of Optimism (OP) and the expected positive impact of Ethereum’s upcoming upgrade on Layer 2 (L2) solutions.
Optimism (OP) has a promising future, with expectations that it will become the leading L2 solution for Ethereum. The growth of Optimism (OP) DeFi and NFT activities may drive demand for faster and cheaper transactions, further boosting the value of OP. However, regulatory changes and market volatility may affect the development trajectory of Optimism (OP).
STRONG
Starknet (STRK)'s total locked value (TVL) has rapidly increased by 194% in the past week, showing that the project has managed to regain market trust despite recent controversies. This impressive growth after the mainnet launch has established Starknet (STRK) as a strong L2 solution. However, recent allegations of token dumping have cast a shadow on the project's price performance.
The price of Starknet (STRK) is currently under some pressure and could fall further unless Ethereum experiences a significant rally. With Starknet (STRK) development activity declining, this could be interpreted as a bearish sign. However, the increase in the stablecoin supply held by whales suggests that there may be enough buying power to support a rebound in price.
Starknet (STRK)'s future price action may be influenced by the token unlocking schedule and Ethereum's overall performance. Although the increase in TVL is a positive sign, Starknet (STRK) needs to overcome recent negative sentiment and stabilize its token economics to ensure long-term growth.
ARB
Despite hitting an all-time low in September 2023, Arbitrum (ARB) has seen a recovery, with its native ARB token recovering to around $1.8 by January 2024. This recovery can be attributed in part to its integration with The Graph and the gradual stabilization of the broader market.
The forecast for Arbitrum (ARB) is cautiously optimistic, predicting a rise to $6.25 by 2025. Short-term forecasts suggest a possible range of $1.68 to $1.99 by early 2024, reflecting the current volatility of the market and the challenges facing L2 solutions.
Arbitrum (ARB)’s long-term success stems from its ability to become the leading scalability solution for Ethereum. While the platform’s technological advancements and network security could solidify Arbitrum’s (ARB) position, competition from other L2 solutions and regulatory uncertainty are challenging its growth trajectory.
in conclusion
Bitcoin, which has led a major recovery in the cryptocurrency market, has surpassed the $63,000 mark for the first time since November 2021. Anticipation for the Bitcoin halving event and increased ETF volume are driving this rally and spreading across all markets, including Optimism (OP), Starknet (STK), and Arbitrum (ARB). Optimism (OP) is recovering due to increased network usage and positive price predictions despite regulatory changes and market volatility. Starknet (STK) is showing promise with a significant increase in TVL despite controversy and declining development activity, indicating renewed market trust. Arbitrum (ARB) has recovered from all-time lows and remains cautiously optimistic as it aims to improve Ethereum's efficiency amid stiff competition from other L2 solutions.
