Bitcoin price saw a sudden 2.5% drop after hitting as high as $19,570 in an overnight rally.
The Bitcoin price (BTC) surged above $19,500 briefly on Dec. 15, reaching as high as$19,570 on Binance. However, BTC then dropped to $19,050 within three hours, recording a sudden 2.5% pullback.
Bitcoin spiked to around $19,600 because of the momentum of its relief rally and negative futures market funding rates. But, it rejected the same level it broke down from since November due to the selling pressure from whales.
A relief rally for Bitcoin was expected
As Cointelegraph reported on Dec. 12, technical indicators showed BTC was oversold after Bitcoin dropped below $17,600.
The 4-hour candle chart saw a bullish divergence and a TD9 buy indicator, signaling that selling pressure was exhausted.
Bitcoin price quickly recovered above $18,000 and continued its run past $18,300. BTC then breaking the whale cluster key resistance level at $18,800 further boosted its momentum.
Buoyed by the relief rally, Bitcoin continued to soar, eventually surging to as high as $19,570 across major exchanges.
Negative futures funding rates fueled BTC
The futures funding rates across Binance Futures and other major platforms turned negative as Bitcoin began to recover above $18,000.
The funding rate of Bitcoin futures contracts turns negative when there are more short-sellers than buyers. This means the likelihood of a short squeeze increases, which could cause buyer demand to suddenly spike.
Although the funding rate was negative for a brief time since Bitcoin’s funding rate rarely turns negative, it was indicative of aggressive selling.
A pseudonymous trader known as “Byzantine General” pointed out that short-sellers were highly aggressive throughout the relief rally. A move above $19,300 would squeeze many shorts, he added, saying:
“Shorts were really aggressive again and they’re underwater now. Breach through 19300 and they get squeezed hard.”
As soon as Bitcoin surpassed $19,300, it quickly made its way to $19,570, suggesting that a large short squeeze occurred.
Exchanges see Bitcoin whales return
Despite the strong recovery, Bitcoin then saw a large sell-off above $19,500 as whales took profits.
Ki Young Ju, the CEO of CryptoQuant, said on Dec. 15 that he is reducing his position due to the increase in whale deposits to exchanges. He said:
“Realized profit at $19,250 and switched from generational long(10x) to normal long(1x). Looking at All Exchange Inflow Mean(144-block MA), $BTC whales are depositing to exchanges. I think whales need more time to make a profit here.”
Don't buy the f*cking dip
Too many $BTC whales on exchanges
— Ki Young Ju 주기영 (@ki_young_ju) December 15, 2020
Since then, Bitcoin has dropped back below $19,100, consolidating under the $19,400 resistance area once again.
In the near term, the key for Bitcoin is to remain above the $18,800 support level. As Cointelegraph reported, this level holding would be a bullish sign that may propel BTC to have another go at new all-time highs.
Source: , CoinTelegraph
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