The recent sudden drop in Bitcoin's price and subsequent significant liquidations have left many investors surprised, leading to questions about the causes of the decline.

Here are the three main factors that have driven Bitcoin's price down by more than 5%.

High Funding and Open Interest

One important factor is the levels of funding and open interest within the Bitcoin ecosystem. High levels of funding and open interest suggest an increase in leveraged positions, making Bitcoin susceptible to price manipulation. This situation can be exploited by whales, or large Bitcoin holders, who may sell off their holdings to trigger a price decrease.

The recent whale activity has resulted in a total liquidation of $157 million across the Bitcoin network, with long orders totaling $144 million.

Grayscale Outflow

Another reason for the price drop is the outflow from the Grayscale Bitcoin Trust (GBTC). GBTC, a popular investment option for institutional investors looking to invest in Bitcoin ETFs, has seen a decrease in demand. These significant outflows from GBTC could be contributing to the decline in Bitcoin's price, which is currently around $66,608. Ethereum has also experienced a notable drop, briefly falling to $3,319 before stabilizing. This sharp decline in prices has led to widespread liquidations across the cryptocurrency market.

Historical Precedent

Lastly, Bitcoin's historical patterns, especially its tendency to go through price corrections before halving events. Bitcoin's halving, which happens roughly every four years, is scheduled for this month, on April 18th!

In summary, the recent price drop in Bitcoin can be attributed to a combination of high market leverage, institutional outflows, and historical trends related to halving events.