Bitcoin Price Dip Not Followed by Massive Futures Margin Call, Market Returns to Neutral
Summary:
Despite the recent drop in Bitcoin price to a two-month low, analysis suggests there wasn't a "massive futures margin call." A consistent "de-leveraging" among Bitcoin futures has been ongoing since mid-March, which is helping subdue the bull market's over-enthusiasm. Comparisons are drawn to the derivatives-led deleveraging events in the 2021 Bitcoin bull market. Despite recent negative outflows from US Bitcoin ETFs, a bounce back to an upward trend is expected by traders. Notably, investor sentiment has seen a significant reset, with the Crypto Fear & Greed Index slipping to “neutral” levels.
Bitcoin’s recent plunge to a two-month low was not followed by the "huge futures margin call" as per a thorough analysis. Checkmate, a senior on-chain analyst from the blockchain data company Glassnode, brought a crucial shift in Bitcoin's bull market to light on X (previously known as Twitter) on May 2.
Bitcoin took many by surprise when it dropped to $56,500 on May 1, but overall this dip in the bull market seems to be a purgative step for the market's wellbeing. As highlighted by Checkmate, there's been a steady "de-leveraging" in Bitcoin futures following its most recent peak in mid-March. This, he suggests, is putting a lid on the "excessive enthusiasm" of the bull market.
Folks who experienced the 2021 Bitcoin bull market will recall the overwhelming deleveraging influenced by derivatives that ultimately ended it. Does the current scenario suggest a derivative flush out? According to Checkmate, not really.
A chart included in the discussion shows a comparison to Bitcoin's journey to $58,000 in Q1 2021. An ongoing flat funding rate across derivatives contrasts the current market to that of three years ago. Funding rates have simmered down gradually not abruptly, suggesting a lack of a severe futures margin call, Checkmate noted.
Therefore, the focus has shifted to alternate reasons for Bitcoin's recent sharp price fall that has not vastly rebounded from its low point yet. The thread pointed out two statistically significant deleveraging events in futures markets before the sell-off occurred. Although there were two overheated points on the rally to the $73k ATH, the heat dissipated quickly. Again reinforcing that derivatives weren’t predominantly driving this Bitcoin downswing.
In terms of selling, on May 1, net outflows exceeding half a billion dollars were seen in the United States spot Bitcoin exchange-traded funds (ETFs). Likely as an impulsive response to BTC's price drop, BlackRock's iShares Bitcoin Trust (IBIT) saw a nearly $40 million drop, marking its worst day. All ETF products reflected similar patterns with negative flows, as per data from sources like UK-based investment firm Farside. Fidelity Investments' Fidelity Wise Origin Bitcoin Fund (FBTC) experienced the largest outflow, at $191 million.
Trader Mikybull Crypto suggests that the dropping Bitcoin price could intimidate the market before it bottoms out and resumes an upward trend. This is the first since ETF approval that the IBIT has had an outflow, losing $36.9 million with prices below cost basis. He reminds us that during any BTC bull phase, upbeat news often signifies the peak, while adverse news flags the bottom.
A significant reset in the crypto market's sentiment was noted with the Crypto Fear & Greed Index slipping back to a “neutral” zone at 43/100 - its lowest since September of the previous year.
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Published At
5/2/2024 11:25:51 AM
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