The past week has been an eventful seven days of Bitcoin price action and the general cryptocurrency market. From the main cryptocurrency gaining a six-figure value to a “flash crash” to less than $90,000, investors have gone through various emotions in the past week.
Unsurprisingly, Bitcoin’s “flash crash” has been a major source of commentary over the past day, with several experts providing details on how this situation could affect Bitcoin’s trajectory. Below are some of the on-chain lessons learned from the sudden price drop, according to CryptoQuant’s head of research.
What Happened to the BTC Futures Market?
In a new post on the X platform, CryptoQuant’s head of research Julio Moreno predicted a “crash” in the price of Bitcoin to about $88,800 on Thursday, December 5. In context, a flash crash refers to a situation where the price of the asset drops suddenly but recovers almost immediately.
According to Moreno, the recent flash crash experienced by the main cryptocurrency was triggered by a cascade sell-off in the BTC futures market. A crypto expert pointed out that open interest decreased as the price of Bitcoin fell on Thursday, indicating the liquidation of a significant portion of the long positions received in the futures market.
In addition, funding rates, which refer to periodic payments between traders in the perpetual futures market, experienced a significant drop when the price of Bitcoin fell. When currency rates turn negative, it suggests that the market is becoming bearish, with short traders willing to pay a premium.
Moreno noted that the decline in subsidy rates indicated that prices of sustainable futures were falling faster than available prices. It is worth noting that when support rates are in a negative position during a bearish period, it may indicate that traders are expecting more bearish pressure in the short term.
Source: JJCMoreno/X
An on-chain observation that stood out from the position of CryptoQuant’s head of research is that spot demand remains strong despite the weakness of the futures market. This is based on the Coinbase Premium metric, which tracks price differences on Coinbase (the local exchange) and other exchanges (often dominated by futures). According to Moreno, the premium has grown strongly in a positive direction, reflecting strong buying interest among American investors.
Bitcoin Price At A Glance
As of this writing, the price of BTC is sitting just below the $100,500 mark, showing an increase of 2% in the last 24 hours. According to data from CoinGecko, the first cryptocurrency now has a market capitalization north of 2 trillion.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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