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Bitcoin continues to test the critical support level around $89,200 amid increased volatility in recent days.
Bitcoin, which rose to approximately $95,000 on Monday, then retreated for three consecutive days, first falling to the $89,300 level. This area stands out as a significant technical support level as it coincides with the 50-day moving average. The price recovered towards around $90,500 with buying pressure from this level.
Crypto trading firm Wintermute stated that the main reasons behind the recent decline were low trading volume and profit-taking. Jake Ostrovskis, Head of OTC Trading at Wintermute, said that despite the recovery in risk appetite seen at the beginning of the year, the market failed to break through the $95,000 resistance level. According to Ostrovskis, this situation, coupled with ETF outflows over the last two days, led to a volatile and two-way price movement.
Another factor increasing pressure on the market was the downward revision in expectations regarding the Fed’s interest rate policy. According to CME FedWatch data, the probability of an interest rate cut at the January 28th Fed meeting fell to 11.6%. This rate was 15.5% a week ago and 23.5% a month ago.
Positioning in derivative markets indicates increased leverage. The funding rate in Bitcoin perpetual futures remains positive at approximately 0.09%. This suggests that long position holders are paying short positions to keep theirs open, and the “buy the dip” strategy continues even during pullbacks. However, the fact that the funding rate remains positive even during declines indicates a concentration of long positions and a potential increased liquidation risk if the price fails to achieve the expected rise. Analysts warn that even a limited pullback could strain leveraged positions, creating additional selling pressure.
*This is not investment advice.