The three major omens appear at the same time, and the Bitcoin crash is approaching?

Bitcoin began to fall. After the announcement of the minutes of the latest Federal Reserve meeting in the early hours of Thursday morning, the decline intensified, falling below $45,000, the lowest level since the flash crash in early December.

Subsequently, the decline further expanded. As of press time, Bitcoin fell below $43,000 per coin, falling by more than 6% in the day.

Three evil omens appeared at the same time, and the Bitcoin crash is approaching?

Stephane Ouelette, CEO and co-founder of FRNT Financial Inc., a cryptocurrency platform, said:

"The minutes of the Federal Reserve meeting are hawkish. Despite the long-term trends surrounding inflation and value preservation, the subconscious reaction of cryptocurrency investors is often to treat them as pure risk assets."

However, the Bitcoin situation may be far worse than it looks. The depletion of trading volume, the plummet of open interest in futures, and the stagnant number of active addresses are all plagued by it.

These data indicate that the "animal spirit" of Bitcoin investors is weakening. Even after a 33% drop, the bargain-hunting buyer who was once the stable backer of the cryptocurrency market did not make a move. At the same time, new investors have not yet filled the gap after billions of dollars in leveraged positions were written off in the flash crash last month.

Jim Greco, managing director of the crypto trading company Radkl, stated:

"There were a lot of leveraged positions in the system in May last year, and then before November. Maybe a lot of people were eliminated and they need to be replaced by new capital."

Bitcoin investment enthusiasm is fading, and trading activities are sluggish. Data from Kaiko compiled by Messari shows that after several months of declines, the trading volume on the exchanges on Tuesday was only 4.8 billion U.S. dollars. This is a significant drop from the US$13.1 billion a year ago, and it is also well below the annual average of approximately US$9.2 billion.

Three evil omens appeared at the same time, and the Bitcoin crash is approaching?

On December 4 last year, the price of Bitcoin plummeted by more than 20% within a few minutes. Since then, the transaction volume of Bitcoin has not exceeded $10 billion. According to Coinglass.com data, investors liquidated approximately $2.4 billion in long and short cryptocurrency exposure during the decline that day.

Aya Kantorovich, head of FalconX agency reporting, said:

"We used to see that some US funds, hedge funds, etc. basically re-allocated risk assets in the last few hours of each year, but this year we saw a relative decline in trading volume compared to the beginning of last month. I think the problem is still that we are Should I hedge or take a risk?"

The situation in the futures market is similar. After soaring to a record high of US$17.4 billion at the end of October last year, the open interest in the Chicago Mercantile Exchange’s Bitcoin futures contract is now approximately US$10.6 billion, a 39% drop.

The launch of the first US Bitcoin futures ETF in mid-October last year triggered a trading frenzy. The ETF once became one of the funds with the largest trading volume on record. However, the enthusiasm quickly faded and after attracting more than $1 billion in just two days, the assets under management of the ProShares Bitcoin Strategy ETF are now only $1.2 billion.

Three evil omens appeared at the same time, and the Bitcoin crash is approaching?

In the case of Bitcoin's sluggishness, the growth of active addresses (a measure of transaction activity) has also stagnated. CoinMetrics data compiled by Messari shows that the current number is about 971,000, which is lower than 1.2 million a year ago.

Three evil omens appeared at the same time, and the Bitcoin crash is approaching?

Kantorovich believes that this may lay the foundation for a short-term, sharp liquidity contraction, which could lead to a flash crash similar to that in December. He said:

“The fewer active addresses may mean more assets stored in the'cold storage'. The fewer bitcoins that can be traded, the greater the volatility that can be expected as the liquidity between the order books decreases. I think You will see a very fast, very short flash crash, it will clear the open positions in the market very quickly