Even while large-cap cryptocurrencies like ETH, BTC, and several others are rising today, data still indicates that the market is “overheated.”
K33 Research researchers claim that the recent decline in the price of Bitcoin has resulted in a “suboptimal” market structure, indicating an overheated market.
According to K33 head of research Anders Helseth and senior analyst Vetle Lunde’s “Ahead of the Curve” report, which was released on March 19, Bitcoin’s “slow bleed” and the cryptocurrency market’s overall steadily falling prices combined with high funding rates have exposed cryptocurrencies to “leverage-induced amplified downside volatility.”
The researchers clarified that, since reaching an all-time high of $73,835 on March 14, Bitcoin had dropped more than 13% of its value in the last week.
According to the research, the value of ether and BNB Chain’s BNB has decreased by 17% and 1%, respectively.
At the moment, the price of Bitcoin has dropped 14% from its peak. Before rebounding, Bitcoin has experienced 30% declines in each of the previous bull markets.
On the other hand, “holding firm while perps maintain significant premiums” is the open interest in futures.
Helseth and Lunde went on to say that last week’s negative or shallow inflows into Bitcoin investment products contributed to the already hot situation.
The graph below illustrates the decreasing inflows into Bitcoin exchange-traded products (ETPs), with a new yearly high daily net outflow of 4,453 BTC on March 18.
According to data from Farside Investors, $642 million left Grayscale’s converted Bitcoin Trust exchange-traded fund (ETF) on March 18, which is the source of the negative flows.
On March 18, net outflows for the other nine new ETFs stood at $154 million. The other nine had just modest inflows.
But the K33 research experts issued a warning, saying it was “too early” to say whether the latest activity signals a change in the status quo or if spot Bitcoin ETFs had reached saturation.
Even though the flow over the last three days is negative, the weekly net flow to Bitcoin ETFs remains stable at 27,000 BTC because of consecutive days of extremely high flow until Wednesday of last week.
Nonetheless, a major factor in Bitcoin’s “adverse price” behaviour has been the shallowing ETF flows.
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After falling below $62,000 on March 1, Data and TradingView indicated that Bitcoin was making an attempt to regain the $64,000 mark.
Traders and experts are keeping a close eye on the supply area between $64,500 and $63,500, as a violation of this level may lead to more significant corrections.
In a typical Bitcoin bullrun, a 30% drop occurs. The longest winning streak in Bitcoin history began back in December, according to a post on X by Charles Edwards, the founder of Capriole Investments.
A 30% reduction would come to $51K. We can reasonably anticipate all of these stages as possibilities.
Analyst Peter Brandt predicted that Bitcoin would decline to $50,000 based on a bearish technical scenario.
In a statement on X that accompanied the chart below, Brandt stated, “Bitcoin $BTC completes H&S top on Factor Real Range Chart.”
By the way, a pullback to the mid- to upper-$50s would take the price back to the upper edge of the rising channel that it surged from on February 26 – 27.
This week’s primary macro focus is still the Federal Open Market Committee meeting in the United States, which affects not only the cryptocurrency market but all risky assets in general.
Bitcoin may encounter a solid foundation, as this price point has historically shown resilience in bolstering the cryptocurrency’s value.
Investors often perceive this level as a critical psychological and technical support, potentially leading to increased buying activity as traders seek to capitalize on perceived undervaluation.
However, market dynamics can swiftly change, and fluctuations may occur beyond this point, highlighting the importance of comprehensive analysis and risk management strategies for cryptocurrency investors.
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