The bull run of 2020 increased the level of greed among investors, many of whom had forgotten that this is a high-risk market. As a result of the sudden but not too big retracement, all margin buys were discarded from the market. A slight panic increased the level of volatility in Bitcoin up to 80%, and up to 139% in Ethereum.
In the period from February to May 2021, Bitcoin was in a limited price corridor, which many associated with the accumulation of liquidity for the next bull run.
Judging by the growing rate funding rate, it looks to be the case: the more traders are buying cryptocurrency with leverage, the higher becomes the commission for holding a position. But a series of negative news, including Musk’s overkill and the tightening of China’s policy, have led to an adverse resolution: Bitcoin has lost over a half from its highs, and the markets have already leveraged out all margin investors.
At some moment, even the swaps became profitable, making long-term purchases more attractive the shorts, but currently they are at near-zero yields. The correction in cryptocurrencies has brought the market down to earth, having liquidated the leveraged positions. It decreases the load on the network coming from active speculations. Thus, the commission in the Ethereum network has fallen to $23 after peaking to $70 on 12th May.
The institutional demand revealed in open interest towards Bitcoin has reduced by $5 billion. For some time, this will help to further lower the rates, because high-net-worth capital holders are less interested in high volatility than regular traders.
However, there are some who have used the price fall. The portal itsblockchain has traced the transactions of a whale: he or she sold 3,000 BTC on 9th May at an average price of $58.500 and bought 3,521 BTC at an average price of $44,500 on 15th – 19th May. Thus, the investor was able to make a profit of $18.7 million, having increased his or her holdings by 521 BTC.
