Overheated Bitcoin Drops 10% From All-time Highs
15 Mar, 2024 ● Coin news
On March 15, Bitcoin's value fell to $68,319, marking a 4.5% decrease within 24 hours, amid signs of an "overheated" crypto market as reported by the on-chain analytics firm IntoTheBlock.
TradingView data indicated a decline in Bitcoin's price from its recent peak of $73,835 on March 14, with a 9% drop to a new low of $65,565 for the week on March 15.
This downturn in Bitcoin's value led to a broader market sell-off, causing the global cryptocurrency market capitalization to fall by 4.1% to $2.59 trillion, as per CoinMarketCap figures.
Ether, the second-largest cryptocurrency by market cap, saw a 5% decrease to $3,708 in the past 24 hours.
Similarly, major cryptocurrencies like BNB, XRP, Cardano’s ADA, and Dogecoin experienced declines of 2.3%, 7.3%, 5.8%, and 8%, respectively, during the same timeframe.
Among the top 10 cryptocurrencies, only Solana’s SOL recorded an 8% increase over the last 24 hours.
Cointelegraph had previously highlighted the potential for a Bitcoin price correction due to "overheated" market conditions, as summarized by user TOBTC.
Supporting this, IntoTheBlock's market intelligence pointed to increased leverage within the crypto market, signaling a possible correction ahead.
IntoTheBlock's recent On-chain Insights newsletter revealed that the payment between buyers and sellers of Bitcoin perpetual swaps is at its highest since October 2021, with funding rates on Binance and Bybit at 0.06% and 0.09%, respectively.
This results in an annualized cost of 93% and 168% for long Bitcoin positions, indicating a market heavily leaning towards long positions.
Coinglass data showed that the all-time high for Bitcoin futures open interest across all exchanges hit $35.55 billion on March 15, suggesting new market entries driven by spot Bitcoin ETF inflows.
However, IntoTheBlock analysts caution that overly optimistic derivatives positioning could signal a market warning when open interest is excessively high.
The leverage phenomenon extends to decentralized finance (DeFi) platforms, where loan volumes have surged.
The total debt in all DeFi protocols doubled in 2024, with IntoTheBlock noting an increase from approximately $2 billion at the start of January to $4.15 billion by March 14.
The report also observed a significant rise in the "aggregate amount of debt issued through Aave v3 on Ethereum," doubling year-to-date, and a notable increase in wrapped Bitcoin (WBTC) supplied to Aave by over 10,000 BTC (~$700M) in 2024.
With the growing demand for leverage, DeFi rates have risen, leading IntoTheBlock to warn of excessive risk accumulation within the DeFi ecosystem, potentially precipitating a near-term price correction.
As Bitcoin set new records in March, propelled by the success of spot Bitcoin ETFs in the U.S., IntoTheBlock's analysis pointed to "overheated" market conditions, with the top 20 crypto-assets (excluding stablecoins) averaging a 90-day return of 103%.
This profitability has led most traders to substantial gains on their crypto investments. Independent analyst and X user Ali noted that investors are currently enjoying average profits of 70% on their holdings.
In a March 14 X post, Ali shared a CryptoQuant chart illustrating that traders' unrealized profit margins reached 69% following price surges above $73,000—a historical precursor to market corrections as traders start to cash in on their profits.
Ali remarked:
“This level of unrealized $BTC profits is the highest in the past three years!”
Further IntoTheBlock data indicates that 86% of Bitcoin holders are currently in profit, suggesting an increased likelihood of continued selling in the short term as profit-taking persists.
Sources:
https://cointelegraph.com/news/bitcoin-price-drops-9-percent-ath-market-shows-signs-overheated
