Bitcoin Eyes Bull Revival as Dip Below $54K Wipes Out Millions More in Leverage

Bitcoin wiped out more excess bullish leverage with a drop below $54,000 early today, and is now looking north.

AccessTimeIconMar 16, 2021 at 9:47 a.m. UTC
Updated Sep 14, 2021 at 12:27 p.m. UTC
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Bitcoin has erased the losses from its latest price dip and could soon see more gains as normalcy returns to the derivatives market.

Having hit a low of $53,350 during the Asian hours the cryptocurrency is trading 1% higher on the day near $56,200 at press time, according to CoinDesk 20 data. Selling pressure faded near the widely tracked monthly volume-weighted average price (VWAP) of $53,000.

The market now looks ready for a fresh move higher, as the bitcoin perpetual futures funding rate – the cost of holding long positions calculated every eight hours – has dropped sharply from 0.124% to 0.08% after excess bullish leverage was wiped out by the cryptocurrency's pullbacks Monday and Tuesday.

Bitcoin: Average perpetuals funding rate
Bitcoin: Average perpetuals funding rate

Long trades worth $1.16 billion were liquidated on Monday, the most since Feb. 22, according to data provider Coinalyze. And with today's drop, another $368 million-worth were liquidated by major exchanges.

With the lower funding rate, a more sustained move toward record highs could be seen – more so, as global stocks continue to rally with risk sentiment being supported by fundamentals, according to a tweet from Holger Zschaepitz, a markets commentator and economics author.

Further, many U.S. citizens scheduled to receive $1,400 stimulus checks this week could invest part of the cash received into bitcoin, boosting its price. As per a Mizuho Securities survey, nearly $40 billion of the latest round of stimulus checks could be spent on bitcoin and stock purchases.

Technical charts are also suggesting scope for a price bounce.

Bitoin's hourly chart
Bitoin's hourly chart

The 14-hour relative strength index (RSI), a momentum indicator, formed a higher low early today, decoupling from the downtrend in prices. That "bullish divergence" indicates the pullback has run out of steam.

That said, fresh chart-driven selling may be seen if the cryptocurrency drops below the monthly VWAP support at $53,000.

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