Leverage traders ‘flushed out’ by late-February crypto crash: Glassnode

According to Glassnode, a provider of on-chain analytics, the crypto market correction in late February may have created excessive leverage in the markets.

On March 1st, Glassnode released a report analyzing the recent crypto crash. This was only the second significant crypto correction since markets hit new record highs in late 2020.

Glassnode found the crash peaked with a 25% decline from the local peak of $ 58,300 to $ 43,343. Therefore, the move was weaker than the January drop, which retraced around 30% from $ 42,000 to less than $ 30,000.

The analytics provider suggested that these withdrawals are overall positive for the crypto markets, attributing the latest correction to liquidated leveraged positions held by risky speculators:

“Major market corrections are positive events as they destroy speculation, leverage, weak hands, and test-takers’ conviction.”

The report added that several key market indicators were reset as BTC prices found new support, including open interest on futures, futures funding rates, and the price premium for Grayscale’s investment products.

Futures open positions, the total number of outstanding contracts that have not yet been settled, fell nearly $ 4 billion, or 22%, from its high of $ 18.4 billion. Glassnode also commented that perpetual futures rates have also rolled back near zero, which could indicate that traders are unwilling to take short positions, stating:

“Previous combinations of falling open positions and resetting funding rates have shown that speculative trading has faltered.”

However, the report found that open interest is still roughly $ 2.5 billion above its previous high of $ 3.9 billion on Feb.21 – meaning the market is still enjoying significant leverage having.

Glassnode also noted that Grayscale’s Bitcoin Trust shares are trading at a discount to spot market prices for the first time. Investors pay a nearly 4% discount to access exposure to BTC through Grayscale’s trust.

It added that competing products like Canada’s Purpose ETF could lower Grayscale’s premium as more institutional products hit the market and arbitrage opportunities closed.

At the time of writing, Bitcoin prices are up 5.3% in the past 24 hours, with BTC currently switching hands for $ 49,200.

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