- Bitcoin fell over 8% in the past 24 hours after reaching record highs earlier this week.
- Analysts pointed to the US economy and trading strategies surrounding leveraged positions.
- Even so, they remain bullish about the strength of the crypto rallies.
- “Macro will rule out here,” said Jonathan de Wet, CIO at digital asset trading firm ZeroCap.
The Bitcoin bull run is not over despite the price of Bitcoin plummeting to below $67,000, analysts say.
An 8% drop triggered more than $800 million in liquidations in the past 24 hours, according to CoinGlass data. And Bitcoin accounted for about $283 million of those liquidations.
But market watchers are optimistic, pointing to the performance of Bitcoin and Ethereum in recent weeks where they quickly regained value after big price drops.
“Macro will rule out here,” Jonathan de Wet, chief investment officer at digital asset trading firm ZeroCap, told DL News. “If the US economy really hits the skids, then I think we’ll get a more protracted downside. On balance, I still think we are bullish.”
The prediction comes after a rally that has largely been driven by the approval of 10 spot Bitcoin exchange-traded funds in January.
Volumes of $65 billion flowed through US spot Bitcoin ETFs in March alone, breaking records set in February, Bloomberg Intelligence analyst Eric Balchunas tweeted on Thursday.
Bitcoin surged to a record high, surpassing $73,000 earlier this week, and is expected to reach $150,000 to $200,000 over the next year, depending on who you ask.
What’s behind the slump?
Analysts gave different reasons as to why crypto prices dropped on Thursday.
De Wet suggested macroeconomic factors likely caused the drop in crypto prices.
“We saw outlier inflation figures and lower-than-forecast retail sales in the US on Thursday,” he said. “High inflation, low growth is a tough scenario for central banks” amid a “stagflation narrative.”
Ryan McMillin, chief investment officer at Australian crypto fund manager Merkle Tree Capital, said the price decline was likely due to leveraged long positions being “flushed.”
A flush in leverage refers to a market event where traders using borrowed money to buy assets, like Bitcoin, are forced to sell to cover their positions amid a significant drop in asset prices.
Such events have become more frequent since the launch of spot Bitcoin ETFs, according to McMillin.
“This could be a new market dynamic we have to get used to, but ultimately a positive to reset leverage before the next move up,” he said.
Selling pressure can lead to rapid price declines, triggering a cascade of sell orders from other leveraged positions.
As a result, $546 million worth of long positions were liquidated across the crypto market, with Bitcoin accounting for $220 million, CoinGlass data shows.
There are signs that insitutions are also exiting the market. The washout wiped $2 billion from open interest in both futures and perpetual contracts over the last 24 hours, according to Coinalyze data.
A futures contract is a legal agreement to buy or sell a security at a predetermined price at a specified future date, while a perpetual contract is similar but without an expiry.
“This is leveraged longs having their stops hunted,” McMillin said, referring to a strategy where traders aim to squeeze others out of their positions by driving an asset’s price up, triggering so-called stop-loss orders. He added that the open interest wipe-out was “a fair whack.”
Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.