Crypto markets take a hit, and analysis suggests there may be a buying opportunity on the dip

The crypto market had its worst day since August last year, with Bitcoin and Ethereum falling 7.3% and 7.5% respectively, while the total cryptocurrency market capitalization (TOTAL) also defended $1.5 trillion. Under current market conditions, investors are generally speculating on whether there are opportunities to buy on dips.

Over the past 24 hours, more than $480 million in long and short trades were liquidated due to market volatility, the largest unwinding since early November.

Longs accounted for 90% of the total liquidation, and due to market fluctuations, the perpetual funding rate dropped significantly. Although Bitcoin’s funding rate has dropped from 0.030% to a relatively healthy 0.013%, it is still at a high level.

When the perpetual funding rate is positive, longs pay shorts to make up the difference between the price of the perpetual instrument and the spot price of an asset. When the funding rate is higher than 0.01%, the risk of long positions being squeezed out is greater.

Crypto market leverage has been rising since last September, with open interest in Bitcoin futures soaring 92% to $19.2 billion. A small pullback seems natural in response to overleveraged buyers.

Although there is no certainty that the selling has stopped, many expect the crypto market to rebound in 2024, driven by the approval of a spot Bitcoin ETF, and is expected to attract external capital.