Macroeconomic factors such as interest rate hikes drag down Bitcoin, and short-term investors sell off

In the past 24 hours, the price of Bitcoin hit the $38,500 area, reaching its lowest point in the past 80 days. As of press time, the trading price has rebounded slightly to above $39,000. According to TradingView data, the yield on the 10-year U.S. Treasury bond rose to 2.88% early on Monday, the highest level since December 2018. Analysts believe that U.S. Treasury yields have been rising sharply in recent weeks due to high inflation and the Federal Reserve's (Fed) plan to raise interest rates quickly, so risk assets including technology stocks and cryptocurrencies are under pressure.

George Liu, head of derivatives at Babel Finance, said Bitcoin’s increased correlation with stocks could be the main reason for the drop below $40,000.

Glassnode data shows that the 90-day rolling correlation index between Bitcoin and the Nasdaq Composite Index recently broke through 0.6.

Crypto services provider Amber Group expressed a similar sentiment: “This has a lot to do with the bad macro environment… look at stocks and the Nasdaq [tech-heavy index] and the rise in real yields”.

Who is the short side?

Blockchain data showed that selling pressure may have come from short-term traders holding large positions.

Chan Chung, head of marketing at CryptoQuant, told CoinDesk: “Analyzing the overall movement of the bitcoin network from the perspective of the age of coins sold and the amount of funds sold, the most active group during the decline seems to be mainly tokens with an age of 0-1 week + 1 million UTXOs (Unspent Transaction Outputs)”.

This means that most of the tokens with an age of 0-1 weeks were moved during this sell-off, suggesting that the selling pressure may have come from short-term traders.

The spent output value represents the distribution of all spent outputs according to their value. The chart below shows that most of the tokens entering exchanges early Monday were distributed in the 10-100 BTC, 100 BTC, and 1,000 BTC groups.

However, blockchain metrics have their limitations. Whales can hold their Bitcoin in multiple addresses. Chung pointed out: "Whales may have reallocated their wallets yesterday, which makes them look like 0-1 week old UTXO; in fact, it may have been held for more than three years."

Derivatives market bearish

Derivatives traders appear to be preparing for a prolonged decline in Bitcoin, as evidenced by the rising trend in put options, whose skew measures the cost of puts relative to calls.

According to George Liu, open interest in the cash-margin perpetual futures market has increased along with demand for downside hedging. In other words, traders appear to be betting on a decline.

According to data from Coinglass.com, this may be because the funding rate (the cost of holding a long or short position in the perpetual futures market) has turned negative. Negative funding rates mean that traders are convinced that the market is falling and they are paying for their bearish bets. "Selling pressure in the perpetual market has resurfaced as bids outstripped asks. The number of perpetual contracts with negative funding rates has increased, exacerbating downward pressure," Glassnode said in its weekly report.