Bitcoin continues to test the critical support level around $89,200 amid increased volatility in recent days.
Bitcoin, which reached around $95,000 on Monday, then retreated for three consecutive days, first falling to the $89,300 level. This area stands out as an important technical support level because it coincides with the 50-day moving average. The price has recovered towards around $90,500 with buying pressure from this level.
Crypto trading firm Wintermute said the main reasons for 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 start 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 past two days, has led to a volatile, two-way price movement.
Another factor increasing pressure on the market was the downward revision of expectations regarding the Fed’s interest rate policy. According to CME FedWatch data, the probability of an interest rate cut at the Jan. 28 Fed meeting has fallen to 11.6%. This rate was 15.5% a week ago and 23.5% a month ago.
Positioning in derivatives markets indicates increased leverage. The Bitcoin perpetual futures funding rate remains positive at around 0.09%. This suggests that long position holders are paying for short positions to keep theirs open, and that 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 does not constitute investment advice.
