Bitcoin Price Slumps Prompting Wide Cryptocurrency Market Sell-Off
Summary:
On May 31, Bitcoin's price fell by 3.5% to $66,584, strengthening its resistance at the $69,000 level. This drop initiated a sector-wide sell-off that decreased the total crypto market cap by 2.2% to $2.5 trillion. Top ten non-stablecoin cryptocurrencies, including Ether, Solana, BNB, Cardano, and Dogecoin, similarly saw declines. The considerable reduction in Bitcoin's funding rate and a diminished open interest may suggest decreased speculative trading or overall market confidence. The article does not provide investment advice or recommendations, emphasizing the importance of individual research before making investment decisions.
On May 31, the price of Bitcoin (BTC) took a 3.5% hit, slumping to as low as $66,584. This decline served to strengthen BTC's resistance at the $69,000 level and currently has BTC trading at a 9% deficit from its peak of $73,835 achieved March 14.
BTC's plunge below $68,000 at the onset of trading in Wall Street on May 31 triggered a sector-wide sell-off. Consequently, the total value of cryptocurrencies globally has shrunk by 2.2% over the past day, leveling out at $2.5 trillion, as per CoinMarketCap's data.
The trend is mirrored in the top ten non-stablecoin cryptocurrencies, with Ether (ETH) registering a 0.8% dip over the last day. Other cryptocurrencies like Solana (SOL), BNB Chain’s BNB, Cardano (ADA), and Dogecoin (DOGE) experienced dips over 2% in the same timeframe.
Cancelled orders for speculative coins also contributed to the downturn after several days of notable success. Shiba Inu’s SHIB, followed the DOGE example, decreasing by 6.4%. The fresh entrants in Solana’s ecosystem, Dogwifhat (WIF) and Book of Meme (BOME), bore the brunt of the losses at over 5%.
Bloodgood, an independent crypto trader, highlighted the tumble in speculative coins, proposing "capital will rotate to quality" at the end of the frenzy.
The broader elimination of long positions as opposed to short ones has been a catalyst for Bitcoin's weaker performance today. In the Bitcoin derivatives market, about $144 million has been wiped out in the last 24 hours, out of which $105.14 million were long. Liquidations usually involve selling the asset (voluntary or broker-led), putting further downward pressure on the price.
Bitcoin's open interest (OI) now hovers around $33 billion, significantly reduced from its 2024 record high of $39.3 billion. Simultaneously, the currency's funding rate is positive at 0.016% weekly, denoting how much longs are willing to pay shorts to maintain their open positions. The funding rate, however, is significantly below its 2024 high of over 2% weekly.
Concurrent drops in the funding rate and open interest from peak levels suggest a decrease in speculative trading or dwindling market confidence. It could also indicate a shift in trader anticipation about potential price movements, signalling reduced volatility or fewer strong upward price swings.
From a technical viewpoint, Bitcoin's price reduction today is the result of an unsuccessful bid to ascend after probing a key resistance from its previous record highs at $69,000. This resistance has supported BTC's price over the past 10 weeks.
Based on this pattern, a breach of the resistance line could prompt a price increase towards record highs above $73,800 and subsequently into uncharted territory. Please note, this article does not provide investment advice or recommendations. Each investment and trading decision entails risk, and readers should undertake their investigations before making a choice.
Published At
5/31/2024 9:39:29 PM
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