{"id":158686,"date":"2021-01-20T12:02:00","date_gmt":"2021-01-20T09:02:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight\/"},"modified":"2021-01-20T12:02:00","modified_gmt":"2021-01-20T09:02:00","slug":"3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight\/","title":{"rendered":"# 3 reasons Bitcoin abruptly dropped by 7.4% overnight"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a368baf1f697\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a368baf1f697\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight\/#Derivatives_market_was_overheated_before_the_correction\" >Derivatives market was overheated before the correction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight\/#Growing_market_uncertainty\" >Growing market uncertainty<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight\/#Lack_of_upside_volatility\" >Lack of upside volatility<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># 3 reasons Bitcoin abruptly dropped by 7.4% overnight  <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>The price of Bitcoin (BTC) dropped sharply from $37,800 to $35,000 overnight, liquidating $572 million worth of cryptocurrency futures positions.<\/p>\n<p>There are three major reasons why the price of Bitcoin declined steeply in the past 12 hours. The reasons are an overheated derivatives market, growing doubt in the market, and the lack of upside volatility.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-01\/3fd71618-2240-4b1c-a926-8a4ceabef33f.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USD 15-minute candle chart (Bitstamp). Source: Tradingview<\/em><\/figcaption><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Derivatives_market_was_overheated_before_the_correction\"><\/span>Derivatives market was overheated before the correction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Before the pullback occurred, the Bitcoin derivatives market was extremely overheated. The futures funding rate was hovering at around 0.1%, which is 10 times higher than the average 0.01%.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-01\/e9194321-d564-47f3-927a-c298873788b0.png\"><figcaption style=\"text-align: center;\"><em>BTC futures perpetual swaps funding rates. Source: Digital Assets Data<\/em><\/figcaption><\/figure>\n<p>The futures funding rate is a mechanism that achieves balance in the futures market by incentivizing long or short contract holders based on market sentiment.<\/p>\n<p>If there are more long contracts or buyers in the market, then the funding rate turns positive. If it becomes positive, then buyers have to compensate short-sellers with a portion of their contracts every eight hours, and vice versa.<\/p>\n<p>Almost all major cryptocurrencies saw their funding rates spike to around 0.1% to 0.3%, which meant the market was extremely overleveraged.<\/p>\n<p>When the market is this overcrowded, the likelihood of a long squeeze increases, which could cause many futures contracts to get liquidated in a short period.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Growing_market_uncertainty\"><\/span>Growing market uncertainty<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>According to researchers at Santiment, there is \u201ctrader doubt\u201d in the market on whether BTC would hit $40,00 again. They <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/santimentfeed\/status\/1351695936062418945\">wrote<\/a>:<\/p>\n<blockquote><p>\u201cThinking face There is an increasing amount of trader doubt that #Bitcoin will revisit $40,000. But according to address activity and trade volume, the long-term trend still looks plenty healthy. Keep a close eye on whether $BTC&#8217;s usage rate stays propped up.\u201d<\/p><\/blockquote>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-01\/59b823a7-d4cd-4e1e-bb0e-264cecc17e0c.jpg\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>Bitcoin price causes concern among traders. Source: Santiment<\/em><\/figcaption><\/figure>\n<p>The fundamentals of the Bitcoin blockchain network, such as address activity and trade volume, remain strong. However, the market sentiment has dwindled in the past week as BTC continues to struggle to break out of the $38,000 resistance area.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Lack_of_upside_volatility\"><\/span>Lack of upside volatility<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Bitcoin has been seeing weak reactions from buyers throughout the past several days, compared to the initial rally to $42,000 in early January.<\/p>\n<p>During the early phase of the rally, whenever Bitcoin dipped to key support levels, like $35,000, there was often a big reaction from buyers. <\/p>\n<p>However, since mid-January, there have been weaker reactions from buyers at key support levels. This indicates that the expectations of a rally toward the $40,000 to $42,000 resistance area have subsided, at least in the near term.<\/p>\n<p>The selling pressure on Bitcoin mostly came from Asia in the first two weeks of January. But, as shown in the overnight correction on Jan. 19, Bitcoin has started to see weakness in the U.S. market as well.<\/p>\n<p>The combination of limited upside volatility and the lack of upside momentum is seemingly causing traders to become cautious in the near term. This likely means that BTC sees a prolonged consolidation phase until February.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/3-reasons-bitcoin-abruptly-dropped-by-7-4-overnight\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# 3 reasons Bitcoin abruptly dropped by 7.4% overnight &#8221; The price of Bitcoin (BTC) dropped sharply from $37,800 to $35,000 overnight, liquidating $572 million worth of cryptocurrency futures positions. There are three major reasons why the price of Bitcoin declined steeply in the past 12 hours. The reasons are an overheated derivatives market, growing&#8230;<\/p>\n","protected":false},"author":1,"featured_media":158687,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDEvMTE1MDAyM2YtMjdlMy00YmQwLWIxYzItZWZiMDM2N2IzNzg1LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,73785],"class_list":["post-158686","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/158686","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=158686"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/158686\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/158687"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=158686"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=158686"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=158686"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}