The price of Bitcoin (BTC) and Ether (ETH) fell 15% and 20% respectively on April 23 when the cryptocurrency market was flooded with a major correction.
Five factors likely caused the price of Bitcoin and Ethereum to plummet in one day, including massive liquidation, an overheated futures market, the fall in the Kimchi premium, the sale of whales, and concerns about Biden taxes.
Crowded futures market sees $ 4 billion in liquidations
On April 23, in a 24-hour period, the cryptocurrency market saw more than $ 4 billion in positions liquidated.
According to Bybt.com, a data analytics platform, the Bitcoin market is currently largely short, with short positions accounting for around 54%.
This suggests that billions of long positions have been liquidated over the past day, leaving many short positions open.
Data also shows that open interest of the Ether futures market hit an all-time high on CME, indicating that the ETH futures market also became overcrowded. Bitcoin futures outstanding interest rose similarly before the price of BTC fell.
Now both ETH and BTC are in a better position to recover as their outstanding interest has collectively declined.
Bitcoin, in particular, saw its open interest rate on futures fall to levels unseen since March 8 on Binance, which consistently records the highest derivatives trading volume for BTC.
Kimchi premium hits 0%
As the price of Bitcoin and Ether plummeted, South Korea’s Kimchi premium dropped back to 0%.
The premium is now over 4%, but the South Korean cryptocurrency exchange market saw a strong sell-off after a negative statement from the country’s financial watchdogs.
On April 22, South Korea’s financial commissioner, Eun Sung-soo, said the government taxes cryptocurrencies, but they are not financial assets and the government would not protect them.
The unexpected statement from South Korea’s financial watchdog likely sparked a major sell-off in the South Korean cryptocurrency exchange, causing the Kimchi premium to collapse.
Small to medium whales are sold
On April 20, the Material Indicators team, which tracks Bitcoin’s trade flow on major exchanges, said small to medium-sized whales were selling.
The analysts said:
“While $ 1 million + people keep buying dips anyway, $ 100,000 – $ 1 million guys have set lower highs and lower lows for their order flow.”
This trend was especially significant because large whales collected Bitcoin during the same period.
The selling pressure exerted by small to medium-sized whales, which sold between $ 100,000 and $ 1 million worth of Bitcoin on major exchanges, amplified Bitcoin’s short-term downturn.
Biden tax concerns
The timing of Bitcoin’s price drop also coincided with the release of US President Joe Biden’s plans to impose taxes on wealthy individuals.
The US stock market fell as the Dow Jones fell more than 1% in a single trading session on April 22.
Holger Zschaepitz, a market analyst at Welt, said at that moment:
OUCH! Dow collapses 400 points for fear of higher capital gains taxes. BBG reports that Biden plans to raise a capital gains tax of up to 43.4% for wealthy Americans. Earning 1. mln, up 20% currently. “