Type to search

On-Chain Analyst Explains What Caused Bitcoin to Plunge from $38k to $30k

On-Chain Analyst Explains What Caused Bitcoin to Plunge from $38k to $30k

Mainframe AI
Share

On-Chain Analyst Explains What Caused Bitcoin to Plunge from $38k to $30k

He said that the vast brunt of the Bitcoin market correction was probably a byproduct of Coinbase going down, which resulted in algorithmic traders/bots failing to function. Woo explained:

What Happened During the Drop?


Advertisement

  • Bitcoin faced an extremely steep correction on Sunday and Monday following a week’s surge to new all-time highs.
  • The cryptocurrency dropped as low as $30,000 after peaking at $42,000 last week.
  • A big part of Bitcoin’s drop was seemingly a byproduct of Coinbase’s downtime, Willy Woo says.
    Bitcoin recovered as purchasing volume spiked, according to analysts.
    Cost tags: xbtusd, btcusd, btcusdt
    Charts from TradingView.com
    On-Chain Analyst Explains What Caused Bitcoin to Plunge from $38k to $30k

    The purchase price of Bitcoin on Coinbase, together with the costs on other exchanges, strongly diverged during the downturn as each exchange faced different service outages. Woo indicates that Coinbase’s outage resulted in algos dragging the price lower due to high funding rates:

    High financing rates tend to be indicative of an overextended market primed to correct lower.
    “Spot market sell off started around $38k, then Coinbase partially failed, not registering purchases, causing its price to go $350 lower than many others, this pulled down the index price that futures exchanges use to calculate leverage financing, wrecking bearish havoc on speculative markets.”
    Bitcoin faced an extremely steep correction on Sunday and Monday following last week’s surge to new all-time highs. On Monday morning, the cryptocurrency plunged as low as $30,000 on top exchanges amid the volatility, over 25% below the $42,000 highs.
    Willy Woo, a crypto-asset analyst focused on on-chain tendencies, recently broke down what happened.

    Although the crash has ceased and Coinbase is now up and running, the Bitcoin financing rate on top platforms stays overextended. Feb ByBt, the financing rate of the BitMEX marketplace is at 0.1% per eight hours, and this is overextended in the majority of cases.
    While the cryptocurrency apparently remains on a path of growth, many market participants were caught off guard by the move lower. In accordance with ByBt, more than $2.8 billion worth of crypto futures positions were liquidated during the drop.
    — Willy Woo (@woonomic) January 11, 2021
    “Unlike previous crashes in the past 2 years, where over-leveraged markets lead by trader liquidation, this one started on spot markets, then was greatly amplified by a single exchange partially failing, yet did not turn itself off for the good of the ecosystem.”

    Spot market sell off started around $38k, then Coinbase partially failed, not registering purchases, causing its price to go $350 lower than many others, this pulled down the index price that futures exchanges use to calculate leverage financing, wrecking bearish havoc on speculative markets

    Bitcoin is not yet in the clear because of these funding rates, some state. Yet due to the quantity on the uptake, analysts have started to lean bullish once more.

Tags:

You Might also Like

error: Alert: Content is protected !!