Experts cite three factors: fear of setbacks, ambiguities over tether, and legislative concerns as factors that pushed the price of bitcoin below $ 30,000 yesterday.
to the the report The Telegraph fell below $ 30,000 after a 35 percent drop in the price of Bitcoin in 24 hours. During this period, something like $ 3.5 billion in liquidity futures was added, which exacerbated the decline.
However, signs of weakness in the derivatives market indicated emotional sales in the market. According to experts, this emotional sale caused instability in the market. These factors can be measured by relying on the price difference between futures and futures markets and the funding rate of maturity-free contracts.
From Elon Musk and Teter to Legislation in the United States
It is very difficult to determine the exact cause of the recent fluctuations. However, it can be said that the role of Elon Musk and his statements about the high consumption of fossil fuels in the bitcoin mining process is important and bold. The New York prosecutor, on the other hand, set yesterday as the deadline for declaring Teter reserves.
Caitlin Long, CEO and founder of Avanti Financial, suggested that traders reduce their investments in the digital currency market, citing the risks surrounding Tetra Credit from the company’s case with the New York prosecutor.
Legislative ambiguities resurfaced after US Treasury Secretary Janet Yellen and Gary Gensler, chairman of the Securities and Exchange Commission, raised concerns about the digital currency environment.
Two days ago, the China Banking and Trading Association, which operates under the central bank, issued a statement entitled “Preventing the Risks of Virtual Currency Trading Transactions.” According to the statement, which was put to the vote of the members, the current rules in China in the field of digital currencies will remain in force.
The situation of future markets
As mentioned earlier, the result of all these factors has led to a 50% improvement in the digital currency market over the past nine days. The impact of the 50 percent drop eventually led to signs of fatigue in futures markets. To better understand the current situation, it is better to look at the price difference between the price of Bitcoin in futures and instant markets.
Quarterly futures are usually traded at a value difference (premium) of 8% to 15% (adjusted). By delaying the settlement time, sellers will demand higher prices, which will increase the value difference.
Over the past few weeks, the index has been above 8%, indicating market confidence. However, yesterday’s fall of several thousand dollars changed the situation greatly. During this downturn, for the first time in 2021, we saw that the price of bitcoin on future platforms was lower than the price on current exchanges, which is a worrying event in itself.
Given the rapid 7% increase in the price of Bitcoin after the fall, it can be said that the activation of the loss limit and the situations that were liquidated were among the causes of the fall below $ 30,000.
To find out if these fluctuations are specific to monthly or quarterly contracts, we need to look at futures without maturities. These derivatives have a special rate that is charged to the investor every 8 hours. This rate is used to ensure that there is no inconsistency between exchange risks.
Whales, arbitrage tables, and market makers are reluctant to enter such markets because of their high funding rates. When purchasing opportunities demand more leverage, they are paid a fee. On the other hand, when sales positions demand higher leverage, we will see a negative funding rate.
As you can see in the chart above, this index has entered volatility levels and is in the negative range of 0.2%, which shows that sales positions pay 4.3% commission per week. Because such conditions encourage buyers to create shopping opportunities, their continuation for a few days is rare.
It may take years to create legislative transparency in the United States or the Tetra case and the New York prosecutor’s office. On the other hand, the recent action of the Chinese government is no different from their decision in September 2017. At the time, China had banned all exchanges and early coin offerings within its territory.
Based on data such as the impact of negative funding rates on futures and non-maturity contracts, it can be concluded that the $ 30,000 bitcoin price floor was liquidated.
The 54% price correction from $ 64,900 was more related to exaggerated reactions to speculation than to negative news reactions.