Bitcoin Slumps 9% Amidst Overheated Market Signals

Bitcoin (BTC) has experienced a 4.5% drop in price over the last 24 hours, trading at $68,319 on March 15. This is due to the crypto market being “overheated”, according to on-chain analytics firm IntoTheBlock. The global crypto market cap has also dropped 4.1% to $2.59 trillion, triggering a sell-off across the market. Other top cryptocurrencies such as Ether (ETH), BNB (BNB), XRP (XRP), Cardano (ADA), and Dogecoin (DOGE) have also experienced price drops ranging from 2.3% to 8%. The only token to record gains among the top 10 cryptocurrencies is Solana (SOL), rising 8% in the last 24 hours.

IntoTheBlock’s data shows that funding rates for Bitcoin perpetual swaps on Binance and Bybit have reached their highest levels since October 2021. These abnormally high funding rates indicate a market skewed heavily on the long side, with buyers of these swaps paying those going short. Bitcoin futures open interest has also reached an all-time high of $35.55 billion, which can be a warning sign for the market when open interest becomes too high.

The high leverage conditions are not limited to centralized exchanges, as loans on decentralized finance (DeFi) networks have also increased. The total debt on all DeFi protocols has doubled from around $2 billion at the beginning of January to $4.15 billion on March 14. The amount of debt issued through Aave v3 on Ethereum has also increased by a factor of 2.14 year-to-date, indicating an increasing demand for leverage. IntoTheBlock warns that the DeFi ecosystem is accumulating too much risk, which may lead to a price correction in the near future.

Bitcoin holders are currently sitting on profits, with the average 90-day return for the top 20 crypto-assets being 103%. According to independent analyst Ali, investors are currently sitting on profits of 70% in their holdings. Data from IntoTheBlock shows that 86% of all Bitcoin holders are in profit at current prices, increasing the likelihood of a continued sell-off as profit-booking continues.