Bitcoin dropped by 6.83% over the past few hours after coming close to the $50,000 mark, missing it by less than $300 on Bitstamp. The asset is consolidating above $47,000 at press time, but the price is looking a little less bullish than last week.
While the current market situation could just be a timely correction, investors may have increased their risk appetite over the past few weeks.
Flattened Bitcoin Spot demands improved Futures/Spot Ratio
According to the recent Bitcoin uncharted report, the spot demand of institutions was observed diminishing in comparison to last’s year accumulation. The total number of withdrawals continued to increase from exchanges, which suggested that some participants were still BTC to their portfolio.
Source: Bitcoin uncharted
As identified in the above chart, institutions had reduced their spot positions in December as increasing demand for futures was observed going in January. It is a clear sign of investors getting comfortable with more risk in the market.
The increasing trade volumes of BTC derivatives exhibited a sign of improving speculation as BTC future/spot ratio start to rise in the charts.
Additionally, Open-Interest on all exchanges reached an all-time high of $16 billion, which is a whopping 60% increase from January 1st, 2021.
Did the market see the drop coming before 50k?
One analyst did.
According to Ki-Young Ju, CEO of Cryptoquant.com, Bitcoin was already appearing to indicate a correction period right before it was supposed to reach the $50,000.
At $49,217, Young-Ju identified that the Coinbase Premium back the price was already in the negative, and the current buying power at that time did not come from the exchange anymore.
The asset re-traced downwards a few hours after his tweet.
Source: Bitcoin Uncharted
Another tell-tale sign that was observed before the correction is the overheated funding rate combined with higher futures/spot ratio. Such a combination is a direct indication that the market is looking at a pullback in the chart.
BitMEX registers $19 million liquidation
Source: Data Mish
After the price plummeted, the leveraged risk can be estimated by the number of longs that were liquidated. On a drop of 6.83%, Bitmex traders witnessed ~$20 million longs liquidated.
Keeping a tab on futures volatility is extremely important at the moment, with Bitcoin registering back to back correction in a short period of time.
