=The price of Bitcoin has collapsed by a sharp fall from $37800 to $35000 overnight while liquidating $572 million worth of cryptocurrency from the future position. There are few major reasons behind the decline of bitcoins in the past 12 hours.
Firstly, the overheated derivative market is incorporating a doubt in the market. Also, there is a lack of upside volatility.
The market with derivatives got overheated before the correction could happen. Before the occurrence of the pullback, the market was extremely overheated. The funding rate for the future was around 0.1%, which is about 10 times higher than the average rate of 0.01%.
The future funding rate of the mechanism is achieving a balance from the future market while incentivizing the long or short contract holders as per the market sentiment. In case there are any long contracts or any other buyer in the market, then the funding can turn positive. It has started to become positive when the buyers are compensating for the short sellers with a portion of their contract every eight hours.
There are also major cryptocurrencies that are seeing the funding rate spike near 0.1% to 0.3%. It means that the market is overleveraged.
The growing uncertainty of the market is another reason. Many researchers say that the trader doubt in the market is going to hit $40000 again. The fundamentals for bitcoin blockchain networks are adding up to the trade volume and activity.
Bitcoin is also getting a weak reaction from buyers in the past few days. It is compared to the initial rally of $42000 from January. In this early phase of the rally, as Bitcoin dropped to $35000 of key support, there is also some big reaction from the buyers.
The selling pressure for Bitcoin comes from Asia in the first two weeks. But overnight, a correction is seen as bitcoin started to see weakness in the market of U.S.
The lack of upside momentum with limited upside volatility has caused the traders to become cautious about their terms.