Volatility has returned to the cryptocurrency market – since the beginning of the week, Bitcoin (BTC) has fallen in price by 5%. At the same time, analysts believe that the market was collapsed by speculators trading derivatives with leverage.
financial technology leader and renowned cryptanalyst Adam Cochran took it upon himself to explain what caused the sudden drop.
In a series of tweets, Cochran highlighted that the recent decline was caused by a sharp increase in open interest (OI) on exchanges. He said bullish expectations for the largest cryptocurrency by market capitalization were high, resulting in long positions on exchanges being significantly increased.
«Speculative traders on ByBit, who, although almost on the same ROI as Binance, had been using leverage for so long that they were paying 40% per annum,” Cochran wrote.
Noting that traders on one side of the trade are not bad in spot markets, Cochran added that the same tactics won’t work in perpetual markets.