According to the analytical platform Glassnode, the collapse of the cryptocurrency market in the second half of February led to the loss of funds by many traders who used leverage on the exchange.
That is, we are talking about trading amateurs who borrowed money from a cryptocurrency platform for transactions. And although the market drawdown was enough to liquidate a huge number of trading positions, this situation is healthy for the market.
So there is no need to worry about what is happening in the future prospects of the market.
The recent drop in Bitcoin has become the largest dollar equivalent in the history of the cryptocurrency: the price of the blockchain asset has decreased by more than 10 thousand dollars. A sharp drop in value is visible on the monthly chart. At the same time, exactly a month ago, they offered 34 thousand dollars for BTC.
Bitcoin price chart for a month
The same applies to the indicator of the total capitalization of the cryptocurrency market, that is, the product of their rate by the number. For clarity, we present a graph of the indicator from the beginning of 2021.
Cryptocurrency market capitalization chart in 2021
Immediately, we note that the crashes of Bitcoin, Ethereum and the coin market in general have happened before – and we are talking about drawdowns of 25 percent or more. Here they are on the BTC value chart in 2017, when the cryptocurrency set a new record and grew from $ 1 to $ 20 thousand in just a year.
The collapse of the rate on the Bitcoin chart in 2017
What will happen to the cryptocurrency market
Glassnode noted that the price of Bitcoin during the second correction in a year fell from a local peak of $ 58,300 to $ 43,343 . So the move was weaker than the January fall: it happened by about 30 percent, from $ 42,000 to less than $ 30,000.
Analysts are confident that such pullbacks on a bullish trend are a natural phenomenon, which indicates a «healthy» growth in an asset, and not just a bubble . Thus, positions with too large leverage are liquidated and the «hardening» of cryptocurrency holders is tested.
Holders or holders are called owners of coins who buy them for a long time – that is, for months and years. Initially, the expression «hodl» came from the publication of a drunk holder of bitcoins shortly after the collapse of the cryptocurrency rate. In it, he made it clear that he did not want to trade and try to catch local highs in asset value. Instead, he decided to just keep the coins for a long time. Read more about the story in our separate article .
The platform’s report indicated that several key market indicators were reset as BTC prices found new support . This includes, among other things, the number of open positions in futures, futures financing rates, and the price premium for Grayscale fund investment products . This means that the market seems to have refreshed, as a result of which the assets ceased to be overbought and returned to their normal state.
By the way, the amount of funds in open positions in BTC futures fell by almost $ 4 billion, or 22 percent, from a peak value of $ 18.4 billion . At the same time, funding rates for perpetual futures have also been dropped to close to zero. This may indicate that traders do not want to open short positions now , that is, try to capitalize on the market crash.
The situation in the market is gradually shifting back into the hands of the bulls. At least, Dan Loeb, CEO of New York-based asset management firm Third Point and a prominent figure on Wall Street, is convinced of this. The day before, he said that he was looking for ways to bridge the gap between traditional finance and the cryptocurrency market. In particular, Loeb wants to do an in-depth study of the latest trends in the digital currency industry – namely, the use of unique NFT tokens .
Recall that NFT tokens are unique cryptocurrencies on the Ethereum blockchain and some other networks. They are attached to certain things from the real world, such as paintings or other works of art. Since the data in the blockchain cannot be changed, the real owner of the same picture and token can easily prove that it belongs to him. In addition, the presence of such a coin will indicate that the work is original and not a fake.
The use of blockchain in the art industry is growing at an incredible pace. In particular, in February it became known about the debut of digital work at the auction house Christie’s, and then sources told about the creation of unique digital works by the Marvel artist Adam Kubert. He is already selling his drawings for the equivalent of tens of thousands of dollars.
Although the expert called the cryptoindustry “a veritable test of intellectual openness to new and controversial ideas,” he also noted that he still maintains a healthy level of skepticism about the prospects for digital assets. Here is his line, in which he shares his attitude to what is happening. Cointelegraph cites a statement .
Culturally, I compare building bridges between the cryptoindustry and the world of traditional finance as finding a portal between two different spaces in the multiverse. Another conflict that needs to be overcome is the idea that being late for the cryptocurrency party will inevitably lead to the latecomer taking a bad place at the high stakes poker table while early adopters of the new technology reap their benefits.
That is, the expert believes that the reputation of the blockchain and cryptocurrency niche is still worth working on. However, its capabilities are already surprising and attracting attention – including skeptics .
We believe the Glassnode experts are right. The crash did indeed allow the market to reboot and save it from the prospect of a more serious decline. In addition, as analysts clarified, the current situation will allow the industry to grow further, and do it at a healthy pace. Judging by today’s growth of BTC above 51 thousand dollars, the experts’ calculations turned out to be correct.
