Bitcoin and Ethereum Rebound with Overheated Signals: K33 Research

Bitcoin’s recent price decline has led to an unstable market, indicating that the market may be overheated, according to analysts at K33 Research. In their report titled “Ahead of the Curve,” the analysts explain that Bitcoin’s steady decline in price and the overall decline in the cryptocurrency market, coupled with high funding rates, have exposed cryptocurrencies to amplified downside volatility caused by leverage-induced risks. Over the past week, Bitcoin has lost over 13% of its value, dropping from its all-time high of $73,835 on March 14. Ether and BNB Chain’s BNB have also experienced losses of 17% and 1% respectively.

The analysts note that Bitcoin is currently trading 14% lower than its all-time high, and historically, Bitcoin has frequently experienced drawdowns of up to 30% before recovering. Futures open interest remains high, and perpetual contracts continue to have significant premiums. The analysts also highlight the lack of inflows into Bitcoin investment products as a further indication of an overheated market. Bitcoin exchange-traded products (ETPs) have experienced declining inflows, with March 18 seeing a net outflow of 4,453 BTC. This outflow primarily resulted from Grayscale’s converted Bitcoin Trust ETP, which saw $642 million leave the fund on that day.

Despite the shallow inflows into ETFs, the analysts caution that it is too early to determine if this represents a saturation point or a regime change. They note that while the three-day flow is negative, the weekly net flow to Bitcoin ETFs still stands at 27,000 BTC due to significant flow days until Wednesday of last week. The decreasing ETF flows have been a contributing factor to Bitcoin’s adverse price action.

In terms of support levels, data from Markets Pro and TradingView show that Bitcoin is attempting to recover the $64,000 level after dropping below $62,000 on March 1. Traders and analysts are closely monitoring the support area between $64,500 and $63,500, as a breach of this level could lead to further corrections. Charles Edwards, the founder of Capriole Investments, suggests that a normal pullback in a Bitcoin bull run is around 30%, which would bring the price down to around $51,000.

Analyst Peter Brandt predicts a drop in Bitcoin’s price to around $50,000 based on a bearish technical setup. He highlights a head and shoulders pattern on the Factor Real Range Chart and suggests that a correction to the mid to upper $50s would retest the upper boundary of the advancing channel.

The macro focus for the week is the meeting of the Federal Open Market Committee in the United States. This event is significant not only for the crypto market but also for all risk assets in general.