The downturn in Bitcoin’s (BTC) price over the last week has led to a “suboptimal” market structure, signaling an overheated market, according to analysts from crypto research firm K33 Research.
In the “Ahead of the Curve” report published on March 19, K33 head of research Anders Helseth and senior analyst Vetle Lunde said Bitcoin’s “slow bleed” and the steadily declining prices across the crypto market accompanied by high funding rates have exposed cryptocurrencies to “ leverage-induced amplified downside volatility.”
The analysts explained that Bitcoin has lost over 13% of its value over the past week after hitting an all-time high of $73,835 on March 14. Ether (ETH) and BNB Chain’s BNB (BNB) have also lost 17% and 1% of their value, respectively, per the report.
“Bitcoin is currently trading in a 14% drawdown from its all-time high. In all prior bull markets, Bitcoin has seen drawdowns as deep as 30% before recovering.”Performance of top three cryptocurrencies by market cap. Source: K33 Research
However, futures open interest is “holding firm while perps maintain significant premiums.”
Helseth and Lunde added that the overheated conditions were supported by the shallow or negative inflows into Bitcoin investment products last week.
The chart below shows that Bitcoin exchange-traded products (ETPs) have seen declining inflows, with March 18 “seeing a new yearly high daily net outflow of 4,453 BTC.”
Daily global net BTC ETP flows. Source: K33 Research
The negative flows stem from outflows from Grayscale’s converted Bitcoin Trust exchange-traded fund (ETF), which saw $642 million exit the ETF on March 18, according to data from Farside Investors.
The other nine new ETFs saw shallow inflows, with net outflows resting at $154 million on March 18.
Bitcoin ETF flow table. Source: Farside Investors
The K33 research analysts, however, cautioned that it was “too early” to determine whether the spot Bitcoin ETFs have reached a saturation point and whether the recent activity represents a regime change.
“While the three-day flow is negative, the weekly net flow to Bitcoin ETFs still…..
