The recent market turbulence has sent shockwaves throughout the cryptocurrency world, particularly impacting Bitcoin (BTC) prices, which experienced a staggering fall of over 18% to $50,000 within a mere 24 hours.

This substantial price drop signifies Bitcoin’s lowest level since February 2024 and mirrors a broader market sentiment of risk aversion, influenced by the strengthening of the Japanese yen and the volatility observed in the U.S. bond market.

The crypto market capitalisation took a significant hit, declining by over 17% to reach $1.76 trillion, according to data from CoinMarketCap.

Carry trading, which had gained significant popularity in the first quarter of 2024, is based on leveraging pricing differences between Bitcoin futures and spot prices.

However, the recent market crash has narrowed this gap, thereby diminishing the profitability of the cash and carry transaction. The annualised three-month futures premium on Binance has plummeted to 3.32%, marking its lowest level since April 2023. Similar declines have been noted on exchanges such as OKX and Deribit.

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During the market turmoil, the price of Ethereum also experienced a significant drop, falling to as low as $2,172 before rebounding to almost $2,200.

This decline in premiums on futures contracts, together with the decrease in spot prices, has had a notable impact on institutional traders who previously capitalised on the higher premiums.

Specifically, futures on the Chicago Mercantile Exchange (CME) are now trading nearly at equal levels with spot prices, thereby making the returns on the classic cash and carry strategy less attractive.

This strategy, which involves holding a long position in the spot market while shorting futures, now offers returns comparable to the 10-year U.S. Treasury note, reducing its appeal for traders.

The overall effect of these market fluctuations has led to Bitcoin’s market dominance rising to 58%, with the cryptocurrency market cap declining by 17% to approximately $1.76 trillion, down from its previous standing at $2.16 trillion.

This sell-off has resulted in the liquidation of $600 million in leveraged long positions and significant losses in altcoins, with Ether (ETH) witnessing a near 20% decline within just two hours. At the time of writing, ETH had partially recovered to around $2,200 after reaching a low of $2,172.

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Bitcoin (BTC) has plummeted below the 50,000 USDT mark and is currently trading at 49,499.988281 USDT, with a narrowed 18.60% decrease within the span of 24 hours.

In light of the recent market downturn and significant losses in altcoins like Ether, it’s crucial to stay informed and proactive in managing your cryptocurrency investments.

Take this opportunity to reassess your portfolio, consider potential adjustments, and stay vigilant in monitoring market trends. Don’t hesitate to seek advice from financial experts or research credible sources to make informed decisions during these volatile times. Stay proactive and safeguard your investments.