Bitcoin falls 10% in 2 days as market faces key challenges

Bitcoin (CRYPTO:BTC) recently experienced a significant decline, dropping from over $64,000 on Monday to $58,000 yesterday, marking a 10% decrease in just two days. 

This sharp downturn has raised concerns within the crypto community and sparked various interpretations of the factors behind this movement. 

According to a report by CryptoQuant, an on-chain data provider, five key factors contributed to this decline. 

One of the primary factors identified is the role of short-term holders in creating resistance at their break-even price. 

After a steep drop earlier this month, many short-term holders were left with an average loss of 17%. 

As the price recovered to their break-even point, they sold their holdings, creating a resistance level that limited further upward movement. 

The report also highlights the fragile environment driven by traders speculating on higher prices. 

Open interest in Bitcoin futures increased by 31%, from $13.5 billion to $17.9 billion since August 5. 

Positive funding rates indicated a premium on perpetual contracts, suggesting that traders expected prices to continue rising. 

However, this optimism created a risky situation where any negative price change could cause significant instability. 

Another factor contributing to the decline was a rise in spot inflows during the price drop, indicating that large holders were moving their Bitcoin onto exchanges, potentially to sell. 

This added selling pressure worsened the already fragile conditions in the futures market. 

The report noted that long positions in both Bitcoin and Ethereum were liquidated at high levels—$90 million for Bitcoin and $55 million for Ethereum—reducing open interest by $2.2 billion, further destabilising the market. 

As the decline continues, with Bitcoin dropping another 3.2% over the past 24 hours to a trading price of $59,841, the market remains in a delicate state. 

CryptoQuant suggests that monitoring on-chain data will be crucial in the coming days as the market seeks to stabilise. 

At press time, the Bitcoin price was $59,185.38.