What caused the Bitcoin crash 10%: Matrixport report? Excessive leverage?

Written by:Krisztian Sandor, CoinDesk

Compiled by: Felix, PANews

Bitcoin dropped by nearly 10% last night. At the same time, Matrixport released a bearish report predicting that the US SEC will reject all spot Bitcoin ETF applications this month.

An analyst at K33 Research said in an interview that the pullback was more likely due to "classic deleveraging" caused by an overheated market rather than personal opinion.

Bitcoin's rapid decline yesterday alerted investors to the asset's downside volatility. Observers (founder of Reflexivity Research) were quick to point out that a research report predicted that the much-anticipated spot Bitcoin ETF was rejected in the United States, and even CNBC host Jim Cramer's comments were potential triggers. However, some analysts said the market pullback may be based on excessive optimism about continued gains.

Market data shows that Bitcoin fell from around $45,000 to $40,800 in a few hours yesterday, which was roughly the time when Singapore digital asset company Matrixport released a report (written by Markus Thielen) predicting that the US SEC will reject all Bitcoin ETs.Xiaobai NavigationF spot application, overturning the view predicted on January 2 that a Bitcoin ETF would be approved soon and rebound to $50,000.

Jihan Wu, co-founder of Matrixport, said that Matrixport analyst opinions are not influenced by management, and the SEC's approval of a Bitcoin spot ETF is inevitable. And this report is unlikely to trigger a market crash, and pointed out that the weakness of crypto-related stocks in the past few days may indicate that the momentum of crypto assets is unstable.

Wu Jihan tweeted early this morning: "It is unrealistic to believe that a report from Matrixport could trigger a trillion-dollar market crash. We have also experienced unexpected declines in crypto stocks for several consecutive trading days, while Bitcoin prices remained stable. Before Markus Thielen published his report, these events seemed to have less impact and received less attention."

Wu Jihan responded again on the X platform this morning, saying that the Matrixport report should not be blamed for the market crash, and that quickly adjusting views should be seen as a capability and advantage.

But some analysts have refuted the views in the Matrixport report, saying there is no evidence that regulators will reject the applications and believe that the chances of ultimate approval are higher.

Bitcoin prices fell rapidly within a day of CNBC host and former hedge fund manager Jim Cramer's positive comments on Bitcoin, notably his pessimistic outlook for Bitcoin in October 2023. Although unlikely, observers later attributed his comments to the price drop, as Jim Cramer's "counterpointers" have always been accurate. (For example, Bitcoin is still up about 60% since his comments last October.)

What caused Bitcoin to fall?

Vetle Lunde, senior analyst at K33 Research, said the market was overheated and over-leveraged, making it highly vulnerable to a downside.

Vetle Lunde said in an interview: “Before the market crash, leverage was very high, most traders were long, and perpetualcontractThis is evidenced by the annualized funding rate (up to 66%) and the surge in the futures premium to an annualized level of 50%. This makes the market extremely vulnerable to downside volatility. "

The Matrixport report provided a catalyst for the unwinding of overleveraged positions, leading to cascading liquidations that exacerbated the decline. CoinGlass data showed that nearly $560 million in leveraged derivatives long trading positions (betting on higher prices with borrowed money) had been liquidated, the highest amount in at least three months.

“This is a classic long liquidation,” said Vetle Lunde.

Surge in crypto derivatives liquidations exacerbates price decline (CoinGlass)

Digital asset research firm CryptoQuant also attributed the decline to abnormally high funding rates in the Bitcoin futures market, which increased selling pressure on Bitcoin miners, and high profit margins for short-term holders.

CryptoQuant analysts said last week that the potential approval of a spot Bitcoin ETF would likely be a “sell news” event that could pull Bitcoin to $32,000.

Is it still possible for a spot Bitcoin ETF to be approved?

LMAX strategist Joel Kruger said in an email that the consensus among most market participants is that it is "just a matter of when, not if" a bitcoin ETF will be approved in the United States.

K33’s Lunde shared a similar view, saying, “Based on Grayscale’s court victory and the back-and-forth between the SEC and the issuer, which resulted in the S-1 filing being updated and requiring a cash creation/redemption model, the likelihood of a SEC rejection is very high.”

The article comes from the Internet:What caused the Bitcoin crash 10%: Matrixport report? Excessive leverage?

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