Bitcoin has been hit by another succession of FUD. At the time of writing, the first cryptocurrency by market cap sits at the higher area of $30,000. Price action is still choppy and uncertainty about a persistent downside trend appears to be taking a toll on the bulls.

A report published by investment firm Coinshares, written by analysts Christopher Bendiksen and James Butterfill, put things into perspective and tries to shed some light on the forces that appear to be driving the crypto market.

Unlike popular belief, the analysts claim that Elon Musk and his tweets about BTC are not the main reason for the current situation, but a catalyst for something already brewing in the past weeks. When exchange Coinbase debuted on the public market, Bitcoin had a first major pullback.

There were a lot of operators with over-leverage positions and liquidations on the derivatives market came close to $8 billion. Similarly, a high number of leverage players took long positions during the crash and liquidations reached an all-time high.

In the past two weeks, the analysts claim that the Bitcoin futures market formed a skew. This suggested an imminent correction, accompanied by a reduction in the aggregate open interest that went from $27.4 billion to $17.4 billion by May 18th, as shown in the chart below. In the long term, this reduction is bullish for BTC’s price, the report claims:

We believe this is a healthy correction as over-levered positions have been wiped clean and the market readjusts to lower leverage levels. We observed a similar pattern during the spring of 2020, which culminated in a significant deleveraging event.

Another bullish indicator, BTC inflows to exchange platforms have been low, the analysts add. In spite of the high selling pressure during the crash, fund inflows during 2021 are very distant from 2018, 2019, and 2020 when Bitcoin experienced severe corrections. The chart below shows BTC inflows as assets under management (AUM) and determines that they represent 0.52% with an 11.7% total in 2021.

Asia appears to be the origin of the recent selloff in the spot market. The analysts claim that there has been a large amount of BTC deposited into Binance with a high buying pressure from the West on Coinbase, a favorite amongst institutions that enter the crypto market.  Unlike retail, institutions have “stronger” hands than short-term retail investors. The report claims:

Taken together, this suggests that the recent move has been driven in no small part by Asian retail investors effectively selling to Western institutions.

Finally, the recent correction is within the historical norm of past years. During previous bull runs, BTC’s price has been known to retrace as much as 55%, as the chart below shows. In 2017, when the price went from $1,000 to $20,000, there were at least 5 corrections along the way.

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