Bitcoin BTC -0.80% has fallen through a price support level that can signal an 8%-12% correction when the price crosses it to the downside, CryptoQuant analysts said in a report published Tuesday.

"As the price of bitcoin has crossed this metric to the downside, bitcoin could decline towards $60,000. The bitcoin price has fallen below the trader's on-chain realized price of $65,800, a key support level in bull markets," the analysts added.

However, Tuesday's CryptoQuant market report said that although bitcoin has fallen below this key level, downside pressure could be limited. Nonetheless, "the market lacks bullish momentum."

CryptoQuant analysts added that traders are still not increasing their bitcoin holdings, and demand growth from large holders, or "whales," remains weak. Additionally, stablecoin liquidity has continued decelerating, growing at the slowest pace since November 2023.

According to an analyst, further downside pressure on bitcoin is coming from the unwinding of basis trades, where traders exploit the price difference between the spot market and futures contracts. The unwinding of these trades can lead to a significant sell-off in the spot market, contributing to a decline in bitcoin's price.

Bitfinex Head of Derivatives Jag Kooner told The Block that a collapse in bitcoin futures open interest is due to the unwinding of the basis arbitrage trade and that spot bitcoin exchange-traded fund (ETF) investments, which were part of the basis arbitrage strategy, have been pulled out, causing further downside pressure on the largest digital asset by market cap.

"As funding rates have gone negative amidst this price decline, ETF inflows that were part of the basis trade have unwound," according to Bitfinex Head of Derivatives Jag Kooner. Kooner pointed to data showing the total value of outstanding contracts in bitcoin futures on the Chicago Mercantile Exchange (CME) has dropped by $1.2 billion in the past ten days.

Bitcoin decreased by around 0.6% in the past day and was changing hands for $64,673 at 10:59 a.m. ET., according to The Block's Bitcoin Price Page. The entire cryptocurrency market capitalization has experienced a decline in the past 24 hours, falling in value by 1.2% to now stand at $2.47 trillion, according to Coingecko data.

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