Bitcoin went through a strong price drop after rallying above $19,500 this week. The price of the cryptocurrency is currently trading somewhere at around $17,000 at the time of publication, indicating a sharp decline in valuation. Data from Coinalyze shows that the resulting price drop caused $1 billion worth of open interest to wipe out from leading Bitcoin futures exchanges.
$1B Open Interest Wiped Out From Bitcoin Futures
The price of the world’s largest cryptocurrency by market capitalization had a sudden drop in its valuation within only a few days. It signifies that there might have been a small correction that resulted in liquidation and stop-loss while causing prices to dip lower.
Meanwhile, the price drop caused a significant increase in trading volumes of $66 billion on futures exchanges and $7 billion on spot exchanges. It also resulted in over $1 billion worth of open interest to be completely wiped out from leading Bitcoin futures exchanges.
The funding rates of top Bitcoin markets also caused the price to reset. Data from ByBt shows that the funding rates in leading crypto exchanges have reset to the baseline of 0.01% per eight hours. Meanwhile, on the OKEx crypto exchange, the funding rates of many pairs have entered into negative regions.
Perhaps, the recent price drop was indeed necessary to assure that derivatives investors were not getting too overleveraged. The funding rate is the rate that long positions pay and short positions based on a recurring system. This ensures that the Bitcoin futures market stays in tandem with the spot price.
Bitcoin Might Rally Again
Bitcoin’s price might rally again if its negative interest rate continues to be lower followed by a period of consolidation.
Bob Loukas, a long time BTC investor, highlighted that the previous bull run showed a similar course of actions where Bitcoin had a similar kind of price drop followed by an all-time high, saying:
“Most have a short memory. Remember in Jan 2017 just shy of #Bitcoin ATH’s, boom 34% decline. The 2 months later a sharp rally, new ATH’s, and double boom 34% decline. Never a one-way street.”