Crypto Market in Turmoil: Should Investors Buy or Sell Bitcoin?

The Bitcoin price is plunging! The levels are now approaching the crucial support level of close to $66,000, despite the volume remaining relatively low. This suggests the buyers are sceptical about the upcoming price action, which has compelled the traders to think about whether to buy or sell Bitcoin. As a result, the price has begun to drop, attributable to less buying activity. This may raise alarms, as major factors are contributing towards the recent BTC price drop. 

High Funding and Open Interest

Funding rates are nothing but fees set by the exchanges to maintain a balance between contract prices and the spot BTC price. The variation in funding rates has been making a huge impact on the price. The negative rates happen when the future contract price is below the spot price. Whenever rates go negative, it signals that the market is likely to experience a downward trend. 

But the current scenario is diverse, as the rates are pretty high, indicating the traders are willing to pay more to maintain long positions. This also indicates there are many leveraged positions in the market and whales or large holders may take advantage of them. They may trigger a price drop by selling off their holdings, which may further lead to a cascade of liquidations among the leveraged traders. 

Increase Grayscale Outflow

Ever since the spot Bitcoin ETF was launched, it has led to a steep rise in prices due to increased inflow. This was also the major reason that the BTC price propelled the formation of a new ATH close to $74,000. Besides, one of the major investment firms, BlackRock, quickly accumulated over 100,000 BTC in just a couple of months, which made the market participants optimistic about the price. Besides, Grayscale Bitcoin Trust (GBTC) is a popular investment vehicle for institutional investors to gain exposure to Bitcoin. 

Ever since the BTC price marked a new ATH at $73,800, the bears have been displaying massive strength. One of the major reasons is the significant outflow from Grayscale, which points to a decrease in institutional demand. This has negatively impacted the price as the bulls continue to remain passive, paving the way for the bears to mount bearish pressure. 

Historical Precedent

The historical pattern of the Bitcoin price suggests the token has a history of experiencing price corrections before the halving events. The halving occurs approximately once every four years when the rewards are reduced to half. This in turn reduces the new issuance of the token and offers a positive impact on the BTC price. 

This anticipation may lead some of the investors to sell off their holdings in anticipation of a price correction. However, this correction may be for a short timeframe, which may lead to a massive upswing of the Bitcoin (BTC) price in the coming days.