After flirting with a market value of $ 2 trillion over the past two days, the cryptocurrency market is up 7% on April 7, and the total market value of cryptocurrency is down to $ 1.8 trillion. Due to the unexpected sell-off, investors quickly found a reason to explain this move.
Excessive influence is generally seen by analysts as a prime suspect, as it usually happens when the market is at a high level and traders are greedy, but this is an easy conclusion to come to.
Determining the real cause can be almost impossible. The starting point, however, is to compare the buyer’s influence with previous weeks. Analysts must also wonder whether the $ 1 billion liquidation is significant in the current bullish environment.
Exchange increases the price movement on both sides
The negative price fluctuation on April 7 is similar to the rally that took place two days ago. However, retailers use leverage using standing futures contracts (reverse swaps) which can exacerbate price corrections.
A deduction of 5% is enough to wind up traders with 20x leverage, and trade order books tend to be below this level as traders rarely have orders in place.
ADA) USDT order book. Source: Binance
As shown above, in the example above, there are $ 4.6 million prices going down to $ 1.15 for Cardano’s ADA. Beyond the 5% threshold, there is only $ 1.9 million left to $ 1.06, or 12% less than the previous trade.
Soft order books are a goldmine for valves and arbitration agencies. When end-user markets enter highly utilized positions, there are many incentives to lower prices and stimulate liquidation.
Overall qualifications. Source: Bybt
A $ 1.4 billion settlement in 12 hours may seem overwhelming, but it unites all futures markets. Furthermore, this represents only 3% of the total open interest rate of $ 46 billion. If this movement had taken place about six months ago, this figure would have been over 12%.
However, an indication that the liquidation triggered the downturn is not the best answer, as they only occur when markets are down 4% or more. While analysts may not fully understand why the correction took place, the “rumored buying and selling news” event could have happened after Coinbase reported its quarterly results.
The funding rate is high, but not abnormal
It is also important to check how high the financing rate is, and most importantly, how long. Even if the 8-hour commission reaches 0.20%, which is equivalent to 4.3% per week, it will not force long-term positions to close.
As shown above, the average funding ratio on the major stock exchanges did not rise above 0.10%, well below the end of February.
It is normal for long traders to enter into over-the-counter trades during a rally, and this situation can last from hours to weeks.
Sometimes dealers turn to sit down ends
Perhaps the whales and market producers knew that the order books were weak and the retailers were overused. Therefore, no one can ignore the fact that today’s price movement is a deliberate maneuver.
However, arbitrage between stock exchanges and futures markets happens almost immediately, so there is no trace left. Analysts and analysts can identify a number of reasons for the current move, but the available evidence suggests that debt alone is not the cause.