Here are three possible reasons for Bitcoin price recent downturn as it reached a 6-month low
Here are three possible reasons for Bitcoin price recent downturn as it hit a 6-month low. At the time of writing, BTC is changing hands at $38,942.
BTC/USD 4-hour chart | Source: TradingView
3 possible reasons for Bitcoin price crash to $38,000
Bitcoin price has been falling for the past few hours. Everything seems to be going well for the past few days. BTC rallied to a high above $43,000 yesterday and it is testing a key resistance area around $44,000.
Unfortunately, the price was later rejected and dropped to $38,000. This saw over $700 million in positions liquidated in less than 24 hours. Now, let’s take a look at three possible reasons why the market bloodbath could have occurred.
The S&P 500 index closed yesterday’s session down 1.1%. The NASDAQ index is down 1.3% in the same time frame. The Dow Jones Industrial Average fell 0.89%.
If that’s not enough, the derivatives market suffers as well. CNBC reported that Nasdaq 100 futures fell after a disappointing earnings report from Netflix. Shares of the streaming giant fell more than 19% in extended trading on Thursday after the document was released, indicating a slowdown in its subscriber growth rate.
The S&P 500’s close below 4,500 yesterday was the first since October 18, 2021. Speaking on the matter was T3 Live’s Scott Redler, who said:
“The market has been flashing faulty signals for the past few weeks and it seems as if the broader indices are finally breaking down.”
Meanwhile, the price of Bitcoin is strongly correlated with traditional indicators and the latest drop is no exception.
Bitcoin x S&P 500 x Nasdaq 100 x Dow Jones | Source: TradingView
One indicator of potential selling pressure is the total inflow of BTC into exchanges. The more BTC there is on exchanges, the more potential selling pressure is usually the highest.
According to CryptoQuant, the total exchange outflows increased in the days leading up to the crash.
Total Exchange Inflows | Source: CryptoQuant
The number has been increasing since January 16 and increasing in price, indicating that BTC was moved to exchange wallets with the intention of selling.
The final reason put trades with a $39,000 strike on Deribit has the highest open interest among the put options.
For those who don’t know, the option is profitable when the price falls. On the other hand, calls at $44k have the highest open interest among the call options.
It should be noted that there are about $538 million in Bitcoin options contracts that will expire on Deribit today and the most painful scenario is that the price will be at $43,000 when this happens.
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- Bitcoin Price Is Plunging To 6-Month Lows, Left Over $700 Million Worth Of Liquidations
- Bitcoin Price Falls Under $40,000; Ether (ETH) And Other Major Altcoins Also Drop