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THIRD LARGEST % PRICE DROP IN BTC HISTORY

 

HIGHEST CORRELATION WITH STOCK MARKET IN BTC HISTORY

  • The 90-day correlation between the bitcoin price and S&P500 went up to the highest level ever seen, after the recent price drop.
  • In just one day, the correlation went from an insignificant level of 0.1 to over 0.5.
  • Even though this correlation is expected to fall drastically again, there is no doubt that the “uncorrelated asset” narrative for bitcoin is taking a hit these days.

 

ALTCOINS TUMBLE DOWN WITH THE BITCOIN PRICE DROP

BTC MARKET SHARE REMAINS STABLE

  • A historical week in the crypto market, which had a major impact on the whole market.
  • The market share of bitcoin stays relatively stable, indicating a drop for all cryptos.
  • Most cryptos dropped down more than 50% between March 12 and March 13, but have recovered some of the losses since.

 

THE MARKET IS NOW EXTREMELY FEARFUL

The Fear & Greed Index dropped like a rock last week and is now down to 9. This situation also show that all indicators have their weaknesses. This index was down to a level of 5 in August 2019. As this index is built on very specific data (volumes, volatility, social media, surveys, dominance and google trends), it doesn’t necessarily get the real market sentiment. We can all agree that the market is more fearful now than in August 2019.

 

RESHUFFLING OF BITCOIN OWNERSHIP! SKYROCKETING VOLUME AMIDST SELL-OFF

A lot of bitcoin have been changing hands over the last week, with daily trading volume touching levels we haven’t seen since the peak in 2019. Last Thursday, March 12, $4.2 billion changed hands. The 7-day average real trading volume* spiked last Friday, touching $1.5 billion – more than double the volume that was seen in the beginning of the week.

 

MAJOR VOLATILITY SPIKE AS BITCOIN CRASHES DOWN

We got the move we talked about a week ago, and it was a big one. Bigger than anyone could have imagined. The 30-day volatility jumped up above to above 8% – levels not seen since 2014.

 

EXTREME VOLATILITY IN THE BTC FUTURES MARKET

  • With the recent price drop, the futures market for bitcoin has turned extremely volatile.
  • The premium rates that we normally see on futures are gone, and some contracts are now trading below spot price.
  • For example, March contracts on Deribit traded 300 dollar below spot on Friday, implying an astonishing -80% annualized premium.
  • Even contracts for September expiry were trading below spot this weekend.
  • The bearish sentiment is definitely reflected in the futures market.
  • The futures market has stabilized a bit during the weekend, but March contracts are still seeing an annualized premium of -40%, and the premium on September contracts are around 0%.

 

WHAT HAPPENED?

 

WHALES DUMPING BTC? LARGE AMOUNTS TRANSFERRED TO EXCHANGES PRIOR TO THE SELL-OFF

  • PlusToken, a pyramid scheme that acquired $2.9 billion in values in bitcoin, still holding around 61,229 Bitcoins, transferred 13,000 BTC from its wallets to exchanges via mixing services one week ago.
  • Identified transfers from the PlusToken wallets has historically coincided with large widespread sell-offs in the market, and this time was no different. Bitcoin plummeted from $9000 to $7500 last weekend following this wallet transfer.
  • The 13,000 BTC were sent to exchanges and likely sold off in the market. The selling can have persisted over a longer time frame and might also explain part of the crash seen on
    Thursday 12th of March.

  • In addition, 1,000 BTC belonging to an old mining wallet dating back to 2010 were sent to 55 different exchange wallets on Thursday 12th of March.
  • Soon thereafter the bitcoin price fell from $8000 to $7500.
  • This sell-off could have initiated what would become the third worst trading day, in terms of % returns, in bitcoins history.

 

BITMEX LIQUIDATIONS SKYROCKETED AND WIPED OUT LIQUIDITY

  • Thursday 12th of March there was blood in the streets as BitMEX had its largest liquidation rate ever, liquidating positions of $876 million during a massive and violent sell-off.
  • The liquidations continued during the night, as over $300m were liquidated in the early hours post midnight. Friday 13th of March ended with $798 million in liquidations.
  • The liquidation halted as BitMEX went down for maintenance between 02:16 and 03:00 CET, due to hardware issues, according to BitMEX.
  • During the maintenance period, the bitcoin price bounced hard as the price moved from $3850 at 02:15 to $5200 at 03:00.
  • Many speculate that this had nothing to do with hardware but was done to avoid a total collapse – a limit down, as is common practice on stock exchanges.
  • The liquidations were likely substantially larger than the liquidity in the order book at the price of the liquidation, leading to a massive feedback loop of liquidations which in turn potentially could have led to a clearing of the order book all the way down to zero on BitMEX.
  • BitMEX has denied this theory and has provided evidence that the downtime was due to heavy CPU pressure, also stating that they have a healthy and vast insurance fund prepared for these kinds of events.

 

WHAT NOW?

 

WILL BITCOIN FIND SUPPORT AT THE 200-WEEK MOVING AVERAGE?

  • No technical analysis can explain the price drop we have seen this past week.
  • This is a good reminder that technical indicators are only that, indicators.
  • The bitcoin price smashed through most moving averages this week, even the 200-weekly average that acted as support when bitcoin bottomed out in 2019.
  • Will it once again be a support level for the bitcoin price?
  • If not, the levels around $4,000 may be a possible support level. This level has historically seen a lot of trading activity.

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