What caused Bitcoin to plunge by 10%: Matrixport report?

By Krisztian Sandor, CoinDesk

Compilation: Felix, PANews

• Bitcoin flash fell nearly 10% yesterday evening, while Matrixport released a bearish report predicting that the U.S. SEC would reject all applications for SpotBitcoin ETFs this month.
• An analyst at K33 Research said in an interview that the pullback was more likely due to a “typical deleveraging” caused by an overheated market than a personal opinion.

Bitcoin’s rapid decline yesterday alerted investors to the asset’s downside Fluctuation. Observers (founder of Reflexivity Research) were quick to point out that a research report predicted a rejection of the highly anticipated SpotBitcoin ETF in the US, and even CNBC host Jim Cramer’s comments were potential triggers. However, some analysts said that the market pullback may be based on excessive optimism about the continued rise in market sentiment.

Market data shows that Bitcoin fell from around $45,000 to $40,800 in a few hours yesterday, which coincided with the release of a report by Singapore-based digital asset company Matrixport (written by Markus Thielen), which predicted that the US SEC would reject all Bitcoin ETF spot applications, overturning the January 2 prediction that the Bitcoin ETF would be approved and rebound to $50,000.

Jihan Wu, co-founder of Matrixport, said that Matrixport analysts’ opinions are not influenced by management, and the SEC’s approval of BitcoinSpot ETF is inevitable. And this report is unlikely to trigger a market crash, noting that the weakness of crypto-related stocks over the past few days may signal a shaky momentum for crypto assets.

Wu Jihan tweeted in the early hours of this morning: “It is unrealistic to believe that a report by 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 have remained stable. Prior to the publication of Markus Thielen’s report, these events appeared to have had 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 the rapid adjustment of views should be regarded as a capability and advantage.

But some analysts dismissed the Matrixport report, saying there was no evidence that regulators would reject the applications and that they had a better chance of being approved.

The price of Bitcoin fell rapidly on the day that CNBC host and former Hedging fund manager Jim Cramer made positive comments about Bitcoin, and it is worth noting that he was pessimistic about the Bitcoin outlook in October 2023. While unlikely, observers have argued in hindsight that his comments “caused” the price to fall, as Jim Cramer’s “back-finger” has always been accurate. (Bitcoin, for example, is still up about 60% since his remarks last October.) )

What caused Bitcoin’s decline?

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

Vetle Lunde said in an interview: “Leverage was very high before the market crash, and most traders were long, as evidenced by the annualized rate of Perptual Futures funding rate (up to 66%) and the futures contango soaring to an annualized level of 50%. This makes the market extremely vulnerable to downside Fluctuation.”

Matrixport’s report provided a catalyst for unwinding over-leveraged positions, leading to cascading liquidations that exacerbated the decline. CoinGlass data shows that nearly $560 million of leveraged Derivatives long trading positions (betting higher prices with borrowed money) have been liquidated, the highest liquidation in at least three months.

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

Crypto Derivatives Liquidation ** Volume ** Surge Sharpens Price Drop (CoinGlass)

CryptoQuant, a digital asset research firm, also attributed the decline to unusually high funding rates in the Bitcoin futures market, increasing selling pressure on BitcoinMiner, and high profit margins for short-term holders.

CryptoQuant analysts said last week that the SpotBitcoin ETF could be approved, most likely as a “sell news” event, which could pull the Bitcoin to $32,000.

SpotBitcoin ETF is still likely to be approved?

LMAX strategist Joel Kruger said in an email that the majority Consensus is that Bitcoin ETFs are approved in the U.S. “only a matter of time, not if.”

K33’s Lunde echoed a similar view, stating that the SEC’s rejection was highly unlikely based on Grayscale’s victory in court and repeated discussions between the SEC and the issuer, which resulted in the S-1 filing being constantly updated and requiring a cash creation/redemption model.

Related reading: LD Capital: The decisive moment is coming, this article sorts out the key information of BTCSpot ETFs