The majority of the top cryptocurrencies have had suffered losses last week. The overall market capitalization was dropped by 300 billion. Many cryptocurrency investors are concerned with the dropping price of Bitcoin. What does this mean? Let's find out.
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BTC Last Week
Last week, Bitcoin fell nearly about 12.4 per cent and failed to live up to the new price high rally. After hitting the ATH of $69,044, Bitcoin fell to a monthly low of $55,500. If talked about the recent price mark, Bitcoin is currently trading at $56,616 with a day change of 0.46 per cent.
Bitcoin historical 90-day annualized volatility. Source: TradingView
The reason for the massive drop was that US President Joe Biden signed a $1.3 trillion infrastructure bill. The proposed bill has included the new tax reporting requirements stating as brokers to certain crypto-related entities. Despite dropping to the monthly low of $55,000, but had a support level after the El-Salvador's president announcement. The President announced the creation of a Bitcoin city in the eastern part of the country.
Nayib Bukele spoke in person at the LaBitConf conference and said Bitcoin City will be functional using geothermal energy from nearby volcanoes. It will be tax-free except for value-added tax (VAT). The plan behind amending VAT is to pay off the bonds issued on Blockstream's Liquid Network to fund city startup costs. The remaining fund will be used in the public sector, as 3,00,000 Bitcoins are required to complete the city's infrastructure.
Also, taking advantage of the Bitcoin drop, The President announced to buy Bitcoin of $500 million to its treasury. Also, tripling El-Salvador's Bitcoin holding is backed by a bond of $1 billion. The last purchase of 420 BTC increased the total of the country's crypto reserve to 1,120 BTC. When we total the BTC holding of El-Salvador, it results in an eye-catching amount of $63,260,836.80. Although it is not yet clear at what price the purchase was made.
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3 Reason Why Bitcoin Dropped to $56.5K
The first thing to accept as a BTC investor or trader is that "accept the unexpected." When compared, the market for the past three months, the volatility seemed much acceptable, per to recent peaks. The trader new to Bitcoin seemed mesmerized to see the correction of 19 per cent after the local top. Even it is more shocking to address the current $13,360 correction from November 10 to ATH.
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The Raised Liquidation: Downside Did Not Trigger Any Alarm
Cryptocurrency traders are known for their high-leveraging trading. Last week $600 million worth long buy of Bitcoin Futures contracts were liquidated. It is a decent number. But when compared, it is less than 2 per cent of the total BTC futures markets. It becomes our first evidence, a lack of a significant liquidation event despite the surge in price.
Bitcoin futures aggregate open interest. Source: Coinglass.com
The Options Markets' Risk Measures Remain Calm
To have a better view of the 'fear and greed' market, investors must analyze the 25 per cent delta skew. The metrics will turn positive when the neutral-to-bearish put options premium is higher than similar-risk call options. The situation, in general, is known as the Fear scenario. The opposite signals bullishness or "greed."
The values lie between 7 per cent positive-negative are deemed neutral. The indicator goes up after 10 per cent, signalling a higher risk of market collapse for pro and arbitrage traders.
Bitcoin 30-day options 25% delta skew. Source: Laevitas.ch
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Margin Traders Can Go Long
Margin traders borrow cryptocurrency to support their current trading position. On the contrary, Bitcoin borrowers can only short it as they bet on the price decrease.
OKEx USDT/BTC margin lending ratio. Source: OKEx
When selecting the range between 09/30 to 11/19, it seemed that traders had been borrowing USDT as the ratio increased from 7 on November 10 to 13 in current. The data is bullish as stable coins has had borrowed by 13 times. Therefore, reflecting their positive exposure to Bitcoin price.
Note: The views and the opinions do not necessarily reflect the views of Flitpay. Every investment or trading move involves risk. You should conduct your research before making a final call.
