The price of Ether (ETH), the cryptocurrency of the Ethereum blockchain network, dropped sharply as Bitcoin (BTC) corrected on January 20.
Bitcoin price also fell 10 percent to $ 34,000.
Ethereum Price Index: How many TL (ETH TL) for Ether?
Why has the price of Ether in particular dropped?
Ether outperformed Bitcoin in performance in January. After the Bitcoin price began to consolidate, the demand for high-risk assets increased, and there was a strong rally in the altcoin market.
However, with the change in the short-term market sentiment around Bitcoin, altcoins also experienced serious declines in both BTC and dollars.
There are two main reasons why the price of Ether is falling sharply. First, the Ether futures market was extremely crowded. The funding rate, which was 0.01 percent in normal times, hovered around 0.3 percent as of January 19.
Second, Ether’s open positions reached an all-time high.
– weights (@DeribitExchange) January 20, 2021
The overcrowding of the options and futures market may have turned the market downwards and triggered mass liquidations. Deribit analysts stated:
“The open positions of Deribit $ ETH options contracts reached their all-time high of $ 1.8 billion. This number represents 89 percent of the total ETH options market. ”
Uncertainty is increasing in the market as investors generally use less leverage on major exchanges.
For this reason, Ether’s short-term path will mostly depend on Bitcoin’s performance in the coming hours. Moreover, the ETH / BTC parity is also located at a critical resistance level of 0.038.
If the Bitcoin price drops below $ 34,000, it seems likely that Ether and all other altcoins will experience a major correction.
If Bitcoin pulls out of $ 34k and starts to rise, Ether will also experience a strong recovery.