Bitcoin’s recent price decline has raised concerns about an overheated market, according to analysts at K33 Research. In a report titled “Ahead of the Curve,” Anders Helseth and Vetle Lunde highlighted the “slow bleed” of Bitcoin’s price and the decreasing prices of other cryptocurrencies as indicators of an unstable market. They also noted the high funding rates and the potential for leverage-induced downside volatility.
Over the past week, Bitcoin has lost over 13% of its value, dropping from its all-time high of $73,835 on March 14. Ethereum and BNB Chain’s BNB have also experienced declines of 17% and 1% respectively.
Despite the price decline, futures open interest remains stable, and perpetual contracts continue to maintain significant premiums. However, the analysts pointed out that inflows into Bitcoin investment products have been shallow or negative, further supporting the notion of an overheated market.
The researchers highlighted the outflows from Grayscale’s converted Bitcoin Trust exchange-traded fund (ETF) as a significant contributor to the negative inflows. On March 18, $642 million exited the ETF, while the other nine new ETFs only saw shallow inflows, resulting in a net outflow of $154 million.
While the decline in ETF flows suggests adverse price action for Bitcoin, the analysts cautioned that it is too early to determine if this represents a regime change or if spot Bitcoin ETFs have reached a saturation point.
Bitcoin’s attempt to recover the $64,000 level after dropping below $62,000 on March 1 is being closely watched by traders and analysts. The area between $64,500 and $63,500 is seen as a key support level, and a breach of this level could lead to further corrections.
Analyst Charles Edwards, founder of Capriole Investments, noted that a normal Bitcoin bullrun pullback is around 30%. He also highlighted the longest winning streak in Bitcoin’s history back in December.
Analyst Peter Brandt expressed a bearish view, projecting a drop in Bitcoin’s price to around $50,000, citing a head and shoulders chart pattern.
The upcoming meeting of the Federal Open Market Committee in the United States is also a key focus for the market, as it could have implications for all risk assets, including cryptocurrencies.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice. Readers should conduct their own research before making any investment decisions.