Last week was a seven-day period for Bitcoin price action and the general cryptocurrency market. To receive a six-figure valuation from the flagship cryptocurrency “Flash crashingBelow $90,000, investors have gone through mixed emotions over the past week.
Unsurprisingly, the Bitcoin “flash crash” has been a major source of commentary over the past day, with several pundits offering insight into how the phenomenon could affect Bitcoin’s trajectory. Following are some on-chain lessons from the sudden price drop, according to CryptoQuant’s head of research.
What Happened in the BTC Futures Market?
In a new post on the X platform, Julio Moreno, head of research at CryptoQuant weighed in On Thursday, December 5th the price of bitcoin “crashed” to around $88,800 in a flash. For context, a flash crash refers to the scenario when an asset’s price drops suddenly but recovers almost immediately.
According to Moreno, the latest flash crash experienced by the premier cryptocurrency was triggered by a sell-off cascade and deleveraging in the BTC futures market. The crypto expert revealed that open interest decreased as the price of Bitcoin fell on Thursday, indicating the liquidation of a significant portion of leveraged long positions in the futures market.
In addition, the Funding rateswhich refer to periodic payments made between traders in the perpetual futures market, experienced a sharp decline when the price of Bitcoin fell. When funding rates turn negative, suggesting the market is bearish, small traders are willing to pay a premium.
Moreno noted that the decline in funding rates indicates that perpetual futures prices are falling faster than spot prices. It is worth noting that when funding rates are negative during a price crash, it may indicate that Traders expect More bearish pressure in the short term.
Source: JJCMoreno/X
An on-chain observation that stands out from CryptoQuant’s head of research is that spot demand remains strong despite weak futures market dynamics. It is based on the Coinbase Premium metric, which tracks the difference in price on Coinbase (a spot exchange) and other exchanges (usually futures-dominated). According to Moreno, the premium has strengthened into positive territory, indicating a strong buying interest among US investors.
Bitcoin price at a glance
According to this text, the Price of BTC sits just below the $100,500 mark, representing a 2% gain over the past 24 hours. According to data from CoinGecko, the premier cryptocurrency now boasts a market capitalization north of $2 trillion.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured images from iStock, charts from TradingView
