In a dramatic turn of events, Bitcoin (BTC) has rapidly recovered above the $100,000 mark after experiencing a brief flash crash that sent its price plummeting to $90,500 on December 5.
Market Analysis: A Swift Recovery
Despite the sudden decline from its all-time high of $104,600, Bitcoin has rallied by 4.57% on the daily chart, maintaining a bullish stance above each exponential moving average (EMA) level on the four-hour chart.
Bitcoin Funding Rate Resets After $400 Million Liquidation
The rapid downturn in price occurred within a one-hour window, during which the candle high and low values were $99,105 and $90,500, respectively. The liquidations reached an astonishing $400 million, marking the largest liquidation event since 2021.
However, this significant negative development had a silver lining: the open interest-weighted funding rate underwent a reset, plummeting from 0.09% on December 4 to 0.01% on December 6. This reduction in the funding rate indicates a relatively deleveraged futures market compared to a few days ago.
Byzantine General’s Analysis
The anonymous trader and Bitcoin futures analyst, Byzantine General, noted that the funding rate reset is a positive development for the asset. They emphasized that the sharp decline in the funding rate, decreased aggregated open interest to the $95,000 level, and a drop in the aggregated spot premium are all indicative of a bullish trend.
"If BTC just continues pumping after that liq cascade, that would be insane, and then there’s truly nothing that can stop this train."
A Brief History of Bitcoin’s Price Volatility
The formation of a bearish spinning top candlestick pattern on the one-day chart is reminiscent of previous significant milestones for Bitcoin. Charles Edwards, founder of Capriole Fund, highlighted that Bitcoin has acted similarly when it crossed $1,000 and $10,000.
"This is normal" for BTC
As illustrated in the chart below, a similar bearish spinning top candle pattern was observed when BTC crossed $10,000 in December 2017 and witnessed severe price fluctuations after it crossed $1,000. In both instances, the bearish volatility was short-term, and the price continued to move upward after these milestone targets were attained.
Bitcoin’s Bullish Tendencies
Based on Fibonacci extensions, the immediate target for Bitcoin remains at $115,000, representing a 15% uptick from the $100,000 level. With the relative strength index (RSI) coiling under the overbought region, an aggressive breakout can take prices as high as $124,500, which falls three times higher with respect to the Fibonacci extensions’ swing low value of $90,500.
Conclusion
The rapid recovery of Bitcoin’s price above the $100,000 mark is a testament to its resilience and adaptability. The funding rate reset, decreased aggregated open interest, and drop in the aggregated spot premium all indicate a bullish trend for the asset.
As the market continues to navigate this uncertainty, it is essential to conduct thorough research and analysis before making any investment or trading decisions.
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