Foto: Ground Picture/Shutterstock
Many bitcoin traders who bet on a price increase have lost their money in recent weeks. The price has fallen sharply, and analysts warn that the top of this market cycle may have been reached.
However, not everyone agrees with this outlook. According to one analysis platform, the recent decline was necessary to make bitcoin ‘healthy’ again, and the price could start rising again soon.
Mid-Sized Bitcoin Investors Step In #
A specific group of bitcoin holders is showing strong buying power: traders with a minimum of 10 and a maximum of 1,000 bitcoin in their possession.
Data from the analysis platform xWIN Finance shows that while small bitcoin investors are selling, mid-sized traders are stepping in to buy.
Short-term traders are currently at a loss and are selling about 800 million euros worth of bitcoin per day.
Analysis platform Santiment also notes the growing buying power among mid-sized to large bitcoin investors. According to the platform, it is historically a good sign when small investors sell and large investors accumulate, as this suggests the bottom has been reached.
Significant Drop in Bitcoin Leverage Positions #
On the derivatives market, traders are also pulling back. Here, trading is not done directly in bitcoin, but in special contracts (derivatives) that allow traders to speculate on price rises or falls. These can be risky bets where a lot of money can be lost.
XWIN shares in a contribution on CryptoQuant that the total open interest, the value of outstanding contracts on the derivatives market, has fallen from $37 billion to $29 billion.
This indicates a significant reduction in leverage positions, possibly partly due to liquidations. While that may sound negative at first, it can actually make the market healthier.
Bitcoin Market Healthier After Price Decline #
In recent months, many traders had bet on rising prices through the derivatives market. When the market started to fall, many investors lost their positions.
Traders who had bet on a price increase were forced to sell, as falling prices cause leverage positions to be automatically closed or liquidated.
The large amount of money lost on the derivatives market in recent weeks had a snowball effect on the price of bitcoin. In the past month, the price has fallen by more than 27 percent, partly as a result.
Because a large portion of the risky leverage positions has disappeared from the market, the market has become healthier. The price is now less vulnerable to sudden liquidations.
“Under the surface, the market structure is quietly improving,” according to xWIN.