23 February

Bitcoin prices plunged as much as 19% in a violent sell-off Monday, the biggest of the year in dollar terms with a loss of more than $10,000, before quickly recovering and settling around $54,000. The day’s price swings came on strong volume across major exchanges. Volume spiked to above $8 billion, the highest levels in almost two weeks.

Blockchain data showed billions of dollars of bitcoin being transferred onto exchanges on Sunday, as this year’s doubling in prices to levels above $58,000 apparently motivated some traders to take profits.

Monday’s sell-off is without a doubt the result of overly confident traders with unsustainable leverage. It’s been brewing for some time, as the premiums on futures have been very high lately. The dump and the liquidations of leverage traders today were necessary and healthy for the market.

For now, even with the price bouncing back, the market is not in an uptrend, and bitcoin needs to consolidate and reclaim $55,000 levels.”

See Also: $25M in DeFi Loans Liquidated as Ether Price Falls
See Also: Bitcoin prints biggest hourly candle in history after BTC rebounds strongly to $54K

Bitcoin’s (BTC) sudden $11,500 drop liquidated more than $1.64 billion worth of BTC futures contracts. This massive figure represents 8.5% of the total $19.5 billion in open interest, which coincidentally had just reached its all-time high. Although these are significant figures, they are proportionally lower than the $1-billion futures liquidation on Nov. 26, 2020. At that time, the 16% correction that followed Bitcoin price testing a $16,300 low reduced the open interest by 17%.

In light of today’s big price move, investors’ positive expectations regarding Bitcoin remain unfazed, as both the futures contracts funding rate and the options 25% delta skew are not flashing any red flags.

By measuring the futures contracts premium against the current spot levels, one can infer whether professional traders are leaning bullish or bearish. Although the premium toned down after touching 5.7% on Feb. 17, it has since dropped down to 3.5%, which is average. Considering that there are 31 days left for the March 26 contract expiry, this translates to an extremely bullish 50% annualized rate.

The 25% delta skew measures how the neutral-to-bullish call options are priced against equivalent bearish put options. The indicator acts as an options traders’ fear and greed gauge, and it is currently sitting at -6%, meaning protection to the upside is more expensive. This further confirms the absence of desperation from market makers and top traders.

Today’s price action might be surprising to new market participants, but those who remember when Bitcoin’s price crashed $11,200 between Jan. 10 and 11 will know that these sharp movements can’t be deemed out of the norm. The data suggests that traders buying today’s dip will likely come out on top.

See Also: Fuel for a broader Bitcoin rally? BTC dip fills futures gap, liquidating $1 billion


“The treasury secretary said a digital dollar maintained by the Fed could result in “faster, safer and cheaper payments,” but added there were “a lot of things to consider” before a possible rollout. She questioned how regulators would “manage money laundering and illicit finance issues” as well as the impact on banks and the Fed.

In addition, the treasury secretary criticized Bitcoin as a medium of exchange:

I don’t think that Bitcoin is widely used as a transaction mechanism. […] It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”

The two commercial banks join the six state-owned banks already participating in the CBDC trial.

China has been trying to curb the power of commercial payments companies, per the report, and the addition of MYbank and WeBank to the digital yuan trials could be a setback to firms like Alipay and WeChat Pay.”

“The London-based firm best known for its bitcoin exchange-traded product XBT has released its CoinShares Gold and Cryptoassets Index Lite (CGI) token on the Ethereum blockchain. The CGI token was built in cooperation with Index Coop, the team behind the DeFi Pulse Index, and the Imperial College of London.

The CGI token consists of two equally weighted “wrapped” crypto assets – wrapped bitcoin (WBTC) and wrapped ether (WETH) – and the firm’s wrapped gold token, wDGLD.”