It’s been a bloody past day for the Bitcoin and broader crypto market.Early this weekend, the cryptocurrency market was gunning for new all-time highs: Ethereum had pushed to $1,350, altcoins were up by double digits, and Bitcoin was holding key supports in the $40,000-41,000 region.Now, Bitcoin trades for $30,600 and Ethereum trades for under $1000. That’s to say, the crypto market is down in excess of 20 percent from the recent highs.bitcoin pricebitcoin price

Chart of BTC’s price action over the past week from
Here are some key data points about this correction and more about what analysts think comes next for the battered market.How much was liquidated?Prior to the correction, the crypto market was extremely overleveraged.The funding rates of futures markets were at extremely high levels of 0.1 percent per eight hours for Bitcoin. The funding rate is the fee that long positions pay short positions on a recurring basis to ensure the price of the future trends to the price of the index over time.These high funding rates meant that long positions were paying a large amount of capital to short positions to remain long.According to ByBt, more than $2.8 billion worth of leveraged crypto positions were liquidated in the past 24 hours.A majority of that capital was in Bitcoin and Ethereum futures markets, where most of the leveraged trading takes place.This represents one of the largest days of liquidation in the cryptocurrency market ever, potentially ever.Despite the correction, the funding rates of the crypto futures markets remain on the high side.What comes next?While Bitcoin’s ongoing correction may have had a technical component to it, it appears that the drop is a byproduct of macro trends.The U.S. dollar index, which tracks the U.S. dollar against a basket of foreign currencies, is up 0.6 percent in the past 24 hours. While this may not sound like a lot, in a market worth trillions of dollars, small shifts have global impacts.Analyst “Bitcoin Jack,” who has been one of the most accurate analysts over the past year, says that he is derisking his portfolio in light of the U.S. dollar bouncing along with other macroeconomic trends:

“I’m derisking too – too much to lose. Futures seem degenerate, dollar bet, bonds moving, USA tension. Bitcoin remains risk on – we had fun. Protect capital during uncertainty – make capital again later. I could be wrong but I’m rather safe than sorry. Where to? Depends on legacy.”

I’m derisking too – too much to lose

Futures seem degenerate, dollar bet, bonds moving, USA tension

Bitcoin remains risk on – we had fun

Protect capital during uncertainty – make capital again later

I could be wrong but I’m rather safe than sorry

Where to? Depends on legacy

— //Bitcoin ?ack ? (@BTC_JackSparrow) January 11, 2021

Despite this macro backdrop, many say that the fundamentals of crypto are better than ever, analysts say.


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