Bitcoin Market Overheated Amid Slumping Prices and High Funding Rates, Warns K33 Research
Summary:
Crypto research firm K33 Research's analysts have warned about an "overheated" Bitcoin market, linked to steadily decreasing prices and high funding rates. The firm notes a 14% decrease in Bitcoin's value from its top, alongside reduced inflows into Bitcoin investment products contributing to market instability. The analysts, however, caution that it may be too early to decide if Bitcoin ETFs have hit a saturation point, despite a three-day negative flow.
Crypto research company, K33 Research, has voiced concerns about the current state of the Bitcoin (BTC) market, describing it as "suboptimal" due to price falls in the last week. Analysts Anders Helseth and Vetle Lunde note in their March 19 "Ahead of the Curve" report that elevated funding rates, coupled with the steady depreciation of prices in the cryptocurrency market, have destabilized digital currencies, leading to enhanced downside volatility.
Over the last week, Bitcoin has seen diminution in its value by over 13% after reaching an all-time peak of $73,835 on March 14. Respective losses amounting to 17% and 1% have also been observed in other cryptocurrencies such as Ether (ETH) and BNB Chain’s BNB (BNB).
The analysts report that despite the 14% shrinkage in Bitcoin's value from its record high, the cryptocurrency has, in previous bull markets, encountered dips as profound as 30% before rebounding.
While the futures open interest remains sturdy, perps continue to possess considerable premiums. The unwelcome market conditions have been corroborated by the meager or reversed inflows into Bitcoin investment products over the past week. Decreasing inflows have been witnessed in Bitcoin exchange-traded products (ETPs) with a notable daily net outflow of 4,453 BTC on March 18.
The adverse flows have emanated from Grayscale's Bitcoin Trust exchange-traded fund (ETF), which saw $642 million leave the fund on March 18. According to Farside Investors, the other nine latest ETFs experienced mild inflows, culminating in net outflows of $154 million on March 18.
However, the analysts from K33 Research have warned investors that it is premature to decide whether Bitcoin ETFs have reached a saturation point, or if the current events indicate a regime shift. They point out that despite the three-day flow being in the negative, Bitcoin ETFs nevertheless retained a substantial weekly net flow of 27,000 BTC.
Meanwhile, the dwindling ETF flows are said to have adversely affected Bitcoin’s price. Providing a bearish technical scenario, one analyst Peter Brandt predicts a drop in BTC's value towards $50,000.
On the international stage, this week’s main focus revolves around the United States Federal Open Market Committee meeting, which would not only impact the cryptocurrency market but risk assets globally.
Please note, this article does not offer investment advice or recommendations. Every investment or trading move carries potential risk, and readers are urged to carry out their own research in order to make informed decisions.
Published At
3/20/2024 7:15:00 PM
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