The past week has been an eventful seven days for Bitcoin price action and the general cryptocurrency market. From the flagship cryptocurrency reaching a six-figure valuation to the “flash crash” below $90,000, investors have gone through various emotions over the past week.
Unsurprisingly, Bitcoin’s “flash crash” has been a major source of commentary over the past day, with several experts providing insight into how this phenomenon could affect Bitcoin’s trajectory. Below are some of the lessons learned from the sudden price drop, according to CryptoQuant’s head of research.
What happened in the BTC futures market?
In a new article on Platform an asset declines sharply but recovers almost immediately.
According to Moreno, the latest flash crash experienced by the leading cryptocurrency was triggered by a cascade of selling and deleveraging in the BTC futures market. The crypto expert revealed that open interest declined as the price of Bitcoin fell on Thursday, signaling the liquidation of a significant portion of leveraged long positions in the futures market.
Additionally, funding rates, which refer to periodic payments exchanged between traders in the perpetual futures market, saw a sharp decline when the price of Bitcoin fell. When funding rates turn negative, it suggests that the market is becoming bearish, with short traders willing to pay a premium.
Moreno pointed out that the decline in funding rates indicated that perpetual futures prices were falling faster than spot prices. It is worth noting that when funding rates are negative during a price crash, this could signal that traders are anticipating further downside pressure in the near term.
Source: JJCMoreno/X
One on-chain observation that stood out from CryptoQuant’s head of research position is that spot demand remains strong despite weak momentum in the futures market. This is based on the Coinbase Premium metric, which tracks the price difference on Coinbase (a spot exchange) and other exchanges (usually dominated by futures). According to Moreno, the premium strengthened into positive territory, reflecting strong buying interest among U.S. investors.
Bitcoin Price at a Glance
At the time of writing, the BTC price sits just below the $100,500 mark, reflecting a 2% increase over the past 24 hours. According to data from CoinGecko, the leading cryptocurrency now boasts a market capitalization of over $2 trillion.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
