What is a decline in the cryptocurrency market
Possible reasons behind Bitcoin's recent fall
What are the possible reasons behind Bitcoin's recent fall?
The price of Bitcoin (BTC) and Ether (ETH) fell 20% and 23% respectively on April 15.
At this point, the cryptocurrency market was gripped by a major correction.
Some factors likely caused the price of Bitcoin and Ether to drop sharply in a single day.
Possible reasons: Overcrowded futures market
The first of the possible reasons for the decline has to do with the fact that the cryptocurrency market had liquidated positions of more than $ 4 billion in 24 hours on April 23.
The Bitcoin market is currently largely sold with short positions accounting for around 54%.
This suggests that the previous day billions of long positions were liquidated and many short positions were left open.
The data also shows that the number of open contracts in the ether futures market in the CME has reached an all-time high.
This therefore indicated that the ETH derivatives market was also overcrowded.
The number of open Bitcoin futures contracts also skyrocketed before the price of BTC fell.
Now both ETH and BTC can recover better as their open positions have collapsed.
Premium Kimchi reaches 0%
The second possible reason is that the kimchi premium in South Korea fell to 0% when the price of bitcoin and ether fell.
The premium is now over 4%.
However, the South Korean cryptocurrency market has had severe liquidation, according to a negative testimony from the country's financial inspectors.
On April 22nd, Eun Sung-soo, South Korea's finance commissioner, said the government is taxing cryptocurrencies.
However, he also said that crypto assets are not financial assets and that the government would not protect them.
The unexpected testimony from the South Korean financial inspector resulted in a large sale in the South Korean cryptocurrency market that led to the collapse of the kimchi price.
Possible reasons: Small to medium-sized whales were offered for sale
Another factor is that small to medium-sized whales sold their positions.
This trend was particularly significant as the great whales amassed bitcoin over the same period.
Selling pressures from small to medium-sized whales, who sold Bitcoin on major exchanges between $ 100,000 and $ 1 million, briefly exacerbated Bitcoin's decline.
Possible Reasons: Concerns about Biden's tax decisions
After all, the moment when Bitcoin prices fell also coincided with the start of US President Biden's plans to raise taxes for the richest.
The US stock market fell and the Dow Jones Industrial Average fell more than 22% in a single trading session on April 1st.
Holger Zschaepitz, market analyst at Welt, said:
OUCH! Dow plunges 400 points for fear of higher capital gains taxes. BBG reports that Biden plans to increase capital gains tax up to 43.4% for wealthy Americans. The proposal would increase the capital gain rate for those earning> $ 39.6 million from the current 1% to 20%. pic.twitter.com/UDhGWRHo00
- Holger Zschaepitz (@Schuldensuehner) April 22, 2021
"There! Dow slashes 400 points for fear of higher capital gains taxes. BBG reports that Biden plans to raise capital gains taxes up to 43.4% for wealthy Americans. The proposal would increase the capital gains rate for those over $ 39.6 million. Earn USD, increase from 1% today to 20%.
All of these factors combined thus contributed to the recent decline.
However, Bitcoin is already in a short-term recovery.
For instructions on how to buy Bitcoin, click here!
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