- Bitcoin’s recent sell-off was fueled by excessive greed, leading to widespread liquidations.
- Santiment reported a record surge in long positions, causing a sharp market reversal.
- Increased open interest and high funding rates contributed to heightened market volatility.
The market of Bitcoin has shown high volatility because the traders got carried away by greed and hence most of them got liquidated. The analytics platform, Santiment, highlighted that the market sell-off occurred after a record number of longs opened on exchanges such as dYdX. The bears took control of these positions to the highest level since Bitcoin ATH in March, paving way for the sharp sell off seen in the coming days.
Market sentiment was mixed again on August 25th as traders held long positions an opening which was immediately opened and shut. The market quickly arrived at the new price, thereby resulting in liquidations affecting all kinds of trading floors. The platform, however, explained that excessive funding rates could cause the market to be more reactive and when such rates shift far in one particular direction, the market could easily reverse.
The platform explains to traders that they are likely to overdo on the short side and that funding rates have an anticipated stabilization or decline. This sort of switch may be an indication that bitcoins and other cryptos are in the right position to rebound from this phase of turbulence.
Bitcoin’s Sharp Decline
CryptoQuant is another reputable analytics firm that provided five charts that explain the recent price dump in the cryptocurrency market. In the last 48 hours, Bitcoin has dropped to $58,053 from a high of $65,062, which is a 10.8% decline.
One of the key reasons as to why the prices went down was due to the short-term traders. These holders were left with their coffers 17% down due to Bitcoin earlier dip in price this month. When the price rose momentarily everyone sold at the breakeven price forming a more resistance level from this there was more pressure on the market. This particular selling activity contributed to worsening the overall market situation.
Rising Open Interest Fuels Bitcoin Market Turbulence
Another carried implication by the speculation exercise was to deepen the market’s volatility. Since August 5th of this year, open interest in Bitcoin has rise from $13.5 billion to $17.9% growth, an increase of 31%. The continued positive funding rates show that there is a preference for contracts that never end, a situation that causes market Turbulence.
Furthermore, CryptoQuant noted a surge in the BTC balance on spot exchanges, indicating that whales were likely to dump their assets. This added selling pressure was evident through the $90 million Bitcoin long liquidations, the highest since early August, and influencing a $2.2 billion reduction in open interest due to a shift in the trading positions of the investors.
Over time the market is bound to respond to these changes and traders and analysts will keep their eyes keen on the funding rates and prices. The next several days would be crucial to determine if Bitcoin could make a bounce back from this new volatility or more declines are to follow.
