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

CryptocurrencyNov 29, 2021 05:01PM ET
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By Yasin Ebrahim

Investing.com – 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 Investing.com 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. 

 
Long-term holders, who have taken some profit on their BTC holdings recently, will continue to hold sway.

There is uncertainty, however, whether long-term holders will continue to sell, but their current holdings are more profitable than in the prior correction seen in September, which could possibly give them greater conviction to hold, or “hodl.”

“Both long and short-term Holders are holding more profitable supply than September's correction, which can generally be viewed as constructive for price,” Glassnode added.

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

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