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According to the Bitfinex Alpha report, Bitcoin's recent price crash has been significantly influenced by the liquidation of futures contracts. Over the past month, Bitcoin (BTC) has fluctuated between $71,300 and $63,500, with the April 12 crash causing more than $1.8 billion in liquidations amid geopolitical tensions. did.
According to Bitfinex analysts, these market moves are not isolated events, as similar patterns have been observed before, where a decline below the range low was met with a quick recovery. However, as the current spot inflows into Bitcoin indicate, the market reaction may be more subdued this time around.
The concept of “time capitulation” is at play here, with leveraged traders facing capital erosion through stop losses and liquidations, while large holders potentially engage in distribution and accumulation.
The introduction of new supplies to the market is an important factor. If absorbed, Bitcoin could move out of its current range. However, by exiting leveraged positions, a large number of market participants are contributing to a healthier market ecosystem with minimal funding rates.
Over the past few days, daily liquidations have been comparable to the March 5th liquidation, resulting in significant volatility for Bitcoin and an intraday price change of 14.5%. Clearances reached similar levels across major exchanges, despite a recent Friday intraday change of 8.5%. Saturday's liquidation was the largest in the asset class' history, with intraday volatility of 12%.
An interesting development during this adjustment is the neutralization of funding rates. These rates are critical in aligning the price of a perpetual futures contract with the actual spot market price. The recent trend towards neutral or negative funding rates across various altcoins suggests a healthy market correction and the potential for less volatility going forward.
As leveraged positions were reduced, open interest across the market decreased significantly, with approximately $12.5 billion disappearing in three days. By Saturday, the change had reduced the total open interest in the cryptocurrency market to $35.4 billion, in stark contrast to the $48 billion peak a few days earlier.
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