Bitcoin (BTC) is currently trading at $68,319, experiencing a 4.5% decline over the past 24 hours. This drop is attributed to the “overheated” conditions observed in the crypto market, as reported by on-chain analytics firm IntoTheBlock. On March 14, BTC reached an all-time high of $73,835, but it has since fallen by 9% to a new weekly low of $65,565 on March 15.
As a result of Bitcoin’s price decline, the entire crypto market has also experienced a sell-off, with the global crypto market cap dropping by 4.1% to $2.59 trillion, according to CoinMarketCap.
Ether (ETH), the second largest cryptocurrency by market capitalization, has also seen a 5% decline in the last 24 hours, trading at $3,708. Other top-cap tokens such as BNB, XRP, Cardano, and Dogecoin have also lost value, with declines ranging from 2.3% to 8%. The only exception is Solana (SOL), which has recorded an 8% gain over the past 24 hours among the top 10 cryptocurrencies.
Earlier, Cointelegraph had warned about a potential correction in the price of BTC due to the “overheated” market conditions. This information is supported by data from IntoTheBlock, which highlights the increasing leverage in the crypto market as a potential sign of a correction.
Furthermore, funding rates for Bitcoin perpetual swaps on Binance and Bybit have reached their highest levels since October 2021, indicating a growing interest in short positions. These fees translate to an annualized cost of 93% and 168% for going long on Bitcoin.
Additionally, Bitcoin futures open interest on all exchanges has reached an all-time high of $35.55 billion on March 15. While high open interest reflects new buying in the market, it also serves as a warning sign for overly bullish positioning in derivatives.
The high leverage conditions are not only limited to centralized exchanges but also extend to decentralized finance (DeFi) networks. The total debt on all DeFi protocols has doubled since the beginning of the year, reaching $4.15 billion on March 14. Aave v3 on Ethereum has seen a significant increase in the amount of debt issued, particularly in wrapped Bitcoin (WBTC), which has increased by more than 10,000 BTC ($700 million) so far in 2024.
The accumulation of risk in the DeFi ecosystem and the overall market conditions suggest a potential price correction in the near future.
Despite the recent decline, Bitcoin holders are still sitting on profits. According to IntoTheBlock, 86% of Bitcoin holders are currently in profit, increasing the likelihood of continued profit-booking and a potential sell-off in the short term.
It is important to note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any investment decisions.