The five factors that likely caused bitcoin and ethereum prices to collapse in a single day are massive liquidations, an overheated futures market, falling kimchi premiums, whale sales, and Biden’s tax problems.
Crowded futures market sees liquidity rise to $4 billion
The 23rd. In April, more than $4 billion in positions were liquidated in the cryptocurrency market in 24 hours.
According to analysis platform Bybt.com, the bitcoin market is currently predominantly short, accounting for about 54% of short positions.
BTC futures on BFBC with open interest. Source: Bybt.com.
This indicates that billions of dollars worth of long positions have been liquidated in the past day, leaving many short positions open.
The data also shows that open interest in the Ether futures market on the CME has reached an all-time high, suggesting that the ETH futures market is also crowded. The open interest in bitcoin futures also jumped up before the BTC price drop.
Now ETH and BTC are in a better position to recover as their open interest has collectively fallen.
Notably, open interest on Bitcoin futures fell to levels not seen since the 8th. March on Binance, which has always recorded the highest volume of derivatives trading for BTC.
Premium Kimchi meets 0%
With bitcoin and ether prices falling, the premium for kimchi in South Korea has dropped to 0%.
South Korean premium index. Source: CryptoQuant
The premium is currently above 4%, but the South Korean cryptocurrency market has seen a sharp sell-off following a negative statement from the country’s financial regulators.
The 22nd. In April, South Korean Finance Commissioner Eun Sung-soo said the government taxes cryptocurrencies, but they are not financial assets and the government will not protect them.
The unexpected announcement by South Korea’s financial regulator likely led to a major sell-off in the South Korean crypto-currency market, causing the Kimchi premium to collapse.
Sale of small- and medium-sized cetaceans
On the 20th. In April, Material Metrics Group, which tracks bitcoin trading on the major exchanges, said small and mid-sized whales had sold out.
While the $1 million plus crowd continues to buy low anyway, the $100,000 to $1 million crowd has identified lower peaks and valleys in their order flow. whales are selling their funds. Source: Material displays
This trend is all the more significant because the great whales have amassed bitcoin over the same period.
Selling pressure from small and medium-sized whales selling bitcoins for $100,000 to $1 million on major exchanges has exacerbated bitcoin’s short-term decline.
The drop in the price of bitcoin also coincided with the unveiling of US President Joe Biden’s plans to increase taxes on the wealthy.
The U.S. stock market fell with the Dow Jones on the 22nd. April fell more than 1% in a single trading session.
Holger Zschaepiec, market analyst at Welte, said at the time:
OW! The Dow Jones falls 400 points on fears of a capital gains tax increase. BBG reports that Biden is considering raising the capital gains tax for wealthy Americans to 43.4%. Under the proposal, the capital gains rate would be increased to 39.6 percent for those earning more than $1 million, up from 20 percent now.
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