Bitcoin Bounces as Dip Buying Prevails, but More Swings Likely Ahead

Bitcoin Bounces as Dip Buying Prevails, but More Swings Likely Ahead
© Reuters

By Yasin Ebrahim – Bitcoin bounced sharply Monday, as investors took advantage of the rout in the popular crypto, but bets in derivative markets suggests wild swings in either direction remain in play.  

Among the notable investors in bitcoin, MicroStrategy continued to add to its bitcoin holdings after acquiring 7,002 Bitcoins worth about $414.4 million.

BTC/USD rose 5.9% to $58,243 after falling to a low of $53,569 on Friday.  

The plunge in bitcoin last week was largely blamed on the bout of uncertainty that rattled investor appetite for risk assets following news of a new variant of Covid-19.

While the news of a fresh Covid-19 variant had soured investor sentiment, a deeper look into the plumbing of the bitcoin network as well as speculative positions on BTC suggest that selloff was already in the making ahead of the news.

“I would say things looked incrementally more bearish before the sell off as funding rates had collapsed, which is a good indicator that leverage is going the other way from a previous market cycle,” Michael Bucella, partner at BlockTower Capital told on Monday

Average funding rates, a gauge of sentiment in the perpetual swaps market, had fallen from around 1.3% in mid-November when BTC hit an all-time high to around 0.6% just before Friday\’s selloff.

Looking ahead, with funding rates near neutral a swing in either direction remains in play. “Funding rates suggest an only slightly positive bias, making both a long- or short- squeeze plausible scenarios,” Glassnode said in a weekly report. 

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