Bitcoin has recently seen a notable decline, dropping from a price above $64,000 on Monday to as little as $58,000 yesterday, marking a ten% decrease over two days.

This sharp downturn appears to have initiated concern among the many crypto community, prompting various interpretations of the market’s behavior.

A recent report by CryptoQuant, an on-chain data provider platform, has illuminated the five key aspects that may need contributed to this decline.

Short-Term Holders And Market Fragility

CryptoQuant’s evaluation highlights five critical charts illustrating the market conditions before and in the course of the recent price drop.

One in every of the first aspects identified by CryptoQuant is the role of short-term holders in making a resistance level at their break-even price.

Earlier this month, Bitcoin’s price experienced one other sharp drop, which left many short-term holders with a median lack of 17%. When the value recovered to its break-even point, these holders took the chance to sell, creating resistance that prevented further upward movement.

Along with the behavior of short-term holders, the report also highlights the delicate environment created by traders speculating on higher prices. The open interest in Bitcoin futures rose from $13.5 billion to $17.9 billion, a 31% increase since August fifth.

Notably, positive funding rates indicated a premium on perpetual contracts, reflecting traders’ expectations of continued price increases. Nonetheless, CryptoQuant revealed that this optimism created a precarious situation where any negative price movement could trigger significant instability in traders’ positions.

Spot Inflows And Market Liquidations

The report also notes a rise in spot inflows in the course of the price decline, suggesting that enormous holders were moving their Bitcoin onto exchanges, potentially to sell. This added selling pressure exacerbated the delicate conditions within the futures market.

CryptoQuant disclosed that as the value continued to drop, long positions in each Bitcoin and Ethereum were liquidated at high levels—$90 million for Bitcoin and $55 million for Ethereum.

These liquidations, the best since August fifth, reduced open interest by $2.2 billion, further destabilizing the market.

CryptoQuant concluded by noting:

That’s what happened with the recent price drop. For now, the market needs a while to stabilize, and we should always monitor the on-chain data in the approaching days.

Meanwhile, the past 24 hours haven’t been any different from the decline seen the times prior. Particularly, over this era, Bitcoin has continued to drop, currently down by 3.2% and with a current trading price of $59,841 on the time of writing.

Featured image created with DALL-E, Chart from TradingView