Earlier in the week, the value of digital currency markets plummeted as billions of dollars were withdrawn from the capitalization of the entire crypto economy. A weekly report from Luno and Arcane Research shows that February 23rd saw the third largest daily bitcoin trading volume in crypto history, when the spot market volume switched $ 18 billion. In addition, crypto derivatives are on the rise, as open positions in bitcoin futures hit $ 19.1 billion on Tuesday.
Bitcoin volatile price fluctuations see intraday fluctuations of almost 20% two days in a row
After Bitcoin (BTC) hit an all-time high on Sunday, hitting $ 58,354 per unit, Bitcoin’s value fell below the $ 50,000 handle at $ 44,846 per coin. The loss between these two price ranges resulted in a reduction in the market valuation of BTC by over 23%.
While losses have been consistently high across the crypto economy, a report from Luno and Arcane Research shows that trading volume on Tuesday was the third largest ever seen. The intraday movements of the digital asset had shown that the price fluctuations of the crypto asset were more irregular. In fact, Luno’s report shows that there were intraday movements of nearly 20% two days in a row.
“The beginning of the week was more volatile than usual. Both Monday and Tuesday there were intraday movements of 18%,” the study says. “Bitcoin fell from $ 57,000 to $ 46,000 yesterday before recovering to $ 54,000. That volatility continued this morning as BTC fell $ 54,000 to $ 45,000 from the opening. This is not yet reflected in the daily volatility metrics as they are based on daily closing prices, ”the report adds.
According to Luno’s report, traders “should be very careful with leverage, both longs and shorts.” Bitcoin derivatives are also said to have “snowballed” in the Bitcoin market and “peaked at $ 19.1 billion this Sunday.” “Yesterday’s sell-off took some of the steam out of the leveraged futures market, but the climate is still hot,” says Luno’s study.
There could be a “stronger rally” in the bull market that will cool the feverish derivatives markets
Pankaj Balani, CEO of Delta Exchange, a digital asset derivatives trading platform, says Bitcoin (BTC) ‘s recent correction has been healthy.
“Despite the correction,” Balani said in a note to investors. “The bull market and the case for a stronger rally in Bitcoin remain intact. This is only the second correction in BTC prices since November, when Bitcoin was above its previous ATH and started a new rally. In the 2017 bull market, Bitcoin corrected 25% to 35% several times before peaking in January 2018, “added the Delta Exchange. For the time being, Balani expects a “short-term consolidation” in BTC prices.
#bitcoin futures volume all time high yesterday pic.twitter.com/steg99xA58
– Offset (@skewdotcom) February 24, 2021
The results from Luno and Arcane Research show that Bitcoin futures (OI) open positions between February 1 and February 22 were 63% higher than BTC’s price increase of just 57%.
“The open interest outperforming bitcoin performance should be a worrying sign as it shows that leverage is $ 10 [billion] is increasing, ”said Luno. “While OI comes from both long and short positions, the huge premiums in the futures market of late suggest that leveraged upside risk of $ 5 billion was the main contributor to rising OI. It would be a good sign for the future if the growth in the futures market were to take a breather, ”the report added.
The dramatic fever on BTC derivatives appears to have cooled, as Luno and Arcane results show that some of the futures that OI liquidated after the sell-off have liquidated.
“Funding rates have returned to neutral territory and the market appears to be healthier,” said Arcane Research’s weekly announcement to investors this week. Currently, after the dump, Bitcoin traders are changing their positions and strategies, focusing on BTC’s next big step.
What do you think of the rising Bitcoin spot market volumes and the feverish Bitcoin derivatives markets? Let us know what you think on this matter in the comments section below.
Photo credit: Shutterstock, Pixabay, Wiki Commons, Twitter, Luno, Arcane Research,
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