Bitcoin price stuck at $32K–$35K: Likely outcomes of BTC flush drop

Thursday 14 January 2021, 3:45 AM AEST - 2 weeks ago

In the short term, the crucial technical resistance level is $35,500. Throughout the past 24 hours, Bitcoin has continuously rejected at that level. When Bitcoin rose to around $35,500 on Binance earlier on Jan. 13, it saw an 8% drop shortly thereafter, indicating that there is strong selling pressure.

A pseudonymous trader known as Byzantine General outlined that there are additional sell orders on Coinbase in the $36,500–$37,000 range, saying Im still not taking bets and adding that he is casually buying dips with spot. There is significant uncertainty in the market due to the large price swings between $31,000 and $35,000 with no breakouts or bearish invalidations. The trader also noted that Bitcoin is currently at VWAP resistance, with high selling pressure at key resistance levels.

The price of Bitcoin (BTC) is ranging between $32,000 and $35,000 after the big flush drop on Jan. 12. Traders remain mixed around BTCs short-term trajectory due to various conflicting signals. Some are bullish because of the quick recovery from $30,500 and Grayscale reopening its products to new investors. Others are cautious due to the continuous rejection at the $35,000–$36,000 resistance range.

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However, the overall sentiment around Bitcoin has been increasingly positive over the past 24 hours. The swift correction from $41,000 to $30,500 flushed a lot of overleveraged buyers and long contracts. Prior to the correction, the Bitcoin futures funding rate was hovering at over 0.1% most of the time, meaning that the market was significantly overleveraged and overwhelmingly long.

The futures funding rate is a mechanism that balances the market by rewarding buyers when the market is majority short and sellers when the market is majority long. In the Bitcoin futures market, the average funding rate is 0.01%. This means that long contract holders have to pay 0.01% of their position every eight hours to their short-seller counterparty. Because the market was overleveraged for such a long time, when the first big drop happened, the price of Bitcoin began to plummet as consecutive liquidations occurred.

Following the drop, the futures market has become signif ...

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