The price of Bitcoin has dropped by around 5.6% in the last 24 hours thanks to some Asian traders taking a short-term bearish view and worried that the new Biden administration in the US will try to dampen cryptocurrency usage.
Taking profit in the spot market occurred during Asian market hours after bitcoin failed to consolidate at an all-time high of $ 40,000 in the past week. In the derivatives markets, short positions grew, led by large bitcoin organizations and holders called whales.
Data from Skew shows that bitcoin’s flat-exchange exchange funding on large derivatives exchanges, a proxy for the cost of maintaining a long position in the derivatives market, dropped today, a suggestion that demand for skewed trades has declined.
Related: Bitcoin Trading in Africa is a Way to Exit Poverty
At press time, bitcoin was trading at $ 35,008.58, according to CoinDesk 20 data.
The sale also led to major corrections for other cryptocurrencies on the CoinDesk 20, including ether, stellar, xrp and chainlink.
Despite some long-term positive opinion that the price of bitcoin could reach as high as $ 100,000, analysts and traders told CoinDesk that major bitcoin holders have become more bearish in the short term, especially after ether, the second-largest cryptocurrency reached according to the new market cap. always high on Tuesday.
“The sentiment in Asia has at least been very bearish in the short term, having seen the retail side become too bullish,” Alex Zuo, China’s vice president of crypto wallet, Cobo, told CoinDesk. He said the recent price surge in alternative cryptocurrencies reflects a growing interest from retail investors, who usually tend to respond to price volatility more significantly.
Related: Guggenheim CIO says Bitcoin may have peaked for the time being
As a result, bitcoin institutions and whales are less inclined to give the market fresh capital. Zuo says. Instead, they either take profit by selling in the spot market or perform arbitration trades by shortening the spot market.
Data from chain analytics firm CryptoQuant also shows that the spot market is under pressure to sell. The ratio of whales on exchanges, which measures the relative size of the top 10 inflows to total inflows for all exchanges, has increased since last week to above 0.85, meaning more major bitcoin holders are depositing bitcoin on exchanges. That is considered a sell signal because it could mean that major bitcoin holders are looking to offload their inventory to the market.
What keeps prices from falling sharply, according to the chief executive of CryptoQuant, is the unloaded bitcoins being hooked up by buyers on one particular exchange.
“If we didn’t see any significant buying pressure from Coinbase Pro, I think bitcoin would be bearish,” said Ki Young Ju, CEO of CryptoQuant at tweeted.
Ki told CoinDesk that one indicator to watch is bitcoin outflow from Coinbase, usually a metric that implies a bitcoin institution’s purchase through over-the-counter desks. Once significant bitcoin outflows from Coinbase occur, the price of bitcoin could recover and even go up as high as $ 100,000, he said.
In the derivative market, the implied volatility on the currency has dropped sharply since it peaked earlier this month, according to data site Skew. The indicator shows investors’ expectation of how troubled prices will be over the next month; discounts usually result in a low cost on option contracts.
“Bitcoin purchases over the last few days are finally taking its toll on the market, while implied volatility on the currency has dropped significantly since peaking earlier this month,” Denis Vinokourov, head of primary brokerage research in London. He bequeathed, he said. “However, call sales have been the dominant drama today and there is still a great deal of open interest in end of month contracts at the $ 52,000 mark, which should allay any concerns the bulls may have.”
Bitcoin Grayscale Trust’s declining premium against its net asset value is another negative sign indicating more selling pressure than buying, Cobo’s Zuo added. The premium dropped to 8.66% on Tuesday from the December peak at 40.18%. Grayscale is owned by Digital Grarency Group (DCG), which also owns CoinDesk.
Another possible cause for the downturn is the nominee of US Treasury Secretary Janet Yellen, who commented negatively about bitcoin and other cryptocurrencies during her confirmation hearing on Tuesday.
During the hearing, Yellen suggested that President Joe Biden’s administration might look at how to curtail the use of bitcoin and other cryptocurrencies in financing criminal activity, including terrorism.
Read More: Janet Yellen says Cryptocurrencies are a ‘concern’ in Terrorist Financing
“There is no doubt that those who come in [Biden’s] the regime will focus on consumer protection more than its predecessor, which means more enforcement action, tightening rules and aiming for more control over the markets, ”said Guy Hirsch, US managing director at eToro . “If the regulators take an aggressive stance against bitcoin, we could go into a protracted bearish run.”