The cryptocurrency market has seen notable price falls and extensive liquidations from leveraged traders, coinciding with signals that Grayscale, a prominent institutional investment firm, could be selling off portions of its Bitcoin holdings. Futures traders faced losses of around $217 million as risk appetite reduced following the news of possible Grayscale sales contributing to price pressure.
Grayscale Holdings Transfer Sparks Selling Worries
Analysis of the fund manager Grayscale transactions showed over $400 million worth of bitcoin being transferred to the cryptocurrency exchange and custody platform Coinbase on Thursday 18 Jan, 2024. Such movements often precede eventual sales by Grayscale to meet redemptions from its flagship Bitcoin Trust product. With the trust trading at a discount to net asset value recently, owing to net outflows, markets saw this as a potential sign that Grayscale may sell some of its substantial bitcoin reserves.
Futures liquidations hit $217 million on price drop
As bitcoin and major cryptocurrencies fell sharply in response to the Grayscale news, highly leveraged traders holding long futures contracts faced sizable losses. Data from trading analytics platforms estimate around $217 million in total positions were forcibly closed, or liquidated, across exchanges over the past day, with bitcoin contracts accounting for $88 million. Such forced closures happen when traders’ positions move against them severely due to volatility, rendering them unable to meet exchanges’ margin requirements.
ETF ‘mania’ fades as focus shifts to future catalysts
With the excitement around preliminary bitcoin exchange-traded fund (ETF) approvals in the US fading somewhat following an initial price boost, cryptocurrency prices have retreated from recent highs. Bitcoin dipped below $42,000, representing a decline of around 3.7% over the past day and 15% from its December high above $49,000. However, some analysts consider the $40,000-42,000 range important near-term support. Attention is now turning to assessing what could drive the next phase of the markets.
Most coins are down, but BNB outperforms
The downturn affected market valuations widely, resulting in a 2.5% decrease for Ether, a 6.5% decline for Solana, and a 5% fall for Cardano. However, BNB, the native token of Binance Smart Chain, managed to secure a slight increase of approximately 0.6%, even against the prevailing downtrend. Its relative strength was supported by active trading on Binance’s initial exchange offerings platform, where users can allocate funds raised to new project listings using staked BNB.