BTC Drop Purging Speculators, Markets Shifting To Spot Trading

Bitcoin remains under immense liquidation pressure at press time. After two days of lower lows, not only did bears reject $63,000 but cratered below May 2024 lows today.

Bitcoin faced immense selling pressure on Monday, as prices fell to fresh lows not seen since May 2024. The drop came amid a wave of liquidations, as bears pushed BTC prices below the $63,000 support level.

However, some analysts saw the crash as a necessary evil to flush out leveraged speculators. According to Ki Young Ju, the founder of crypto analytics platform CryptoQuant, the Bitcoin market had been futures-driven for a “long time.”

While the degree of futures speculation had been declining since the previous bull run in 2024, Ju argued that the crash was needed to clear the BTC market of speculators who were only interested in profiting from short-term price movements, rather than utilizing the solution offered by the network.

Data showed that, as of July 4, the futures-to-spot trading volume ratio had dropped by 63% from its peak in 2021. This shift indicated a healthier development in the market structure, with a decreasing reliance on futures contracts and a greater focus on holding BTC rather than trading it for profit.

Following the Bitcoin flash crash below the $54,000 level, hundreds of millions of dollars in leveraged longs were liquidated across multiple platforms.

A glance at the figures, as reported by Coinglass, revealed that, at the time of writing on July 5, over $323 million worth of leveraged longs were closed, compared to only $121 million of shorts that were forcefully closed.

Most of these positions were opened on Binance and OKX, two of the world’s largest crypto exchanges that offer both spot trading and perpetual futures.

Bitcoin Market Maturing, ETFs Game-changingIn another post, Ju highlighted the potential impact of spot Bitcoin exchange-traded funds (ETFs) on the shift from futures to spot trading.

According to the founder’s assessment, spot Bitcoin ETF issuers were now responsible for around 25% of all capital inflows into spot trading volume. This batch of money, Ju noted, was “more mature than ever” compared to the previous retail-driven market.

As a result, rather than capitulating en masse during price drops, as was typically seen before, these holders were more likely to continue buying and holding, given their greater financial capacity to withstand market pressures.

As Bitcoin matures, more institutions and publicly traded companies are expected to follow in the footsteps of MicroStrategy and Tesla, allocating capital for BTC purchases to diversify their multi-trillion portfolios.

Data showed that, as of early July, spot Bitcoin ETF issuers had already purchased billions of dollars worth of BTC on behalf of their clients.

However, there were also outflows noted in light of the current state of price action. According to Lookonchain, as of July 5, all nine ETFs added 166 BTC, with Fidelity leading the pack by buying 105 BTC.

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