Bitcoin
BTC$70 887.21

1.24%

Ethereum
ETH$3 581.98

0.18%

Tether
USDT$0.999440

-0.05%

Binance Coin
BNB$585.91

1.91%

Solana
SOL$185.65

-0.23%

XRP
XRP$0.620836

0.23%

A Bitcoin price dip for ants? BTC quickly rebounds to a new high above $57K


22 Feb 2021

#Bitcoin

The price of Bitcoin achieved a new all-time high above $57,800 after a brief overnight correction. The price of Bitcoin (BTC) dipped to as low as $53,905 on Binance overnight, recording a sudden 6% drop. But despite the minor correction, the price of Bitcoin quickly recovered thereafter, reaching a new all-time high above $57,800 on Feb. 21.

Why did Bitcoin drop and recover so quickly?

Although Bitcoin saw a steep drop within merely hours, analysts pinpointed that it fell to the exact bottom of a short-term trendline. John Cho, the Director of Global Expansion at Ground X, noted that the drop was a liquidity fill at a lower price. A liquidity fill simply means when an asset drops after stagnating to fill buy orders at the bottom of the range

A drop was expected because Bitcoin was consolidating with the futures funding rate at around 0.15%. Across major futures exchanges, the Bitcoin futures funding rate was hovering between 0.1% to 0.2%, and it was particularly high for stablecoin pairs.

Bitcoin futures exchanges use a mechanism called funding to incentivize buyers or sellers based on market sentiment. For example, when there are more buyers in the market, the funding rate turns positive. When that happens, buyers have to pay sellers a portion of their position every eight hours.

When the funding rate is high but the price of Bitcoin is consolidating, the risk of a big short-term drop increases. This trend is what occurred overnight on Feb. 20, as Bitcoin declined by more than 6%. Although the funding rate remains near 0.1%, it has dropped substantially since.

The funding rate for altcoins, including Ether (ETH) and DeFi tokens, reset to around 0.05%. As such, altcoins saw a stronger bounce than BTC. 

There is one major risk in the foreseeable future

In the near term, Bitcoin faces a major risk due to the U.S. Treasury curve rising. When the Treasury curve rises, historically, risk-on assets like stocks tend to drop. In the past week, the U.S. stock market has corrected quite steeply, demonstrating a clear correlation with the Treasury curve.

However, it remains uncertain whether Bitcoin would react the same way given that it is not only considered a risk-on asset but also as an inflation hedge, which means it could counter the risk of the Treasury curve.

What's more, the correlation between Bitcoin and other assets including stocks and gold has been declining since September 2020. Thus, there is a possibility that the inflation hedge aspect of Bitcoin counters the rising Treasury curve. If so, BTC could remain unfazed, particularly given the current strength of the bull run. 

Misa Christanto, an analyst at Messari, said that in a bear market, everything is correlated. But Bitcoin, which is also considered a "reflation trade," has been resilient. She wrote: "US Treasury curve is steepening. Why should we care? Because in a bear market, everything is correlated. So far the headwinds have been on equity returns, on unprofitable tech names. Reflation trades like $BTC unaffected."

Source


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Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap 7d price change
1 Bitcoin (BTC) BTC Bitcoin predictions 74.4% 43 $70 887.21 1.24% 6.21% $1 394 109 546 043 BTC 7 days price change
2 Ethereum (ETH) ETH Ethereum predictions 73.6% 48 $3 581.98 0.18% 1.77% $430 095 409 886 ETH 7 days price change
3 Tether (USDT) USDT Tether predictions 92.8% 1 $0.999440 -0.05% -0.08% $104 395 696 875 USDT 7 days price change
4 Binance Coin (BNB) BNB Binance Coin predictions 64.8% 79 $585.91 1.91% 4.40% $87 615 290 851 BNB 7 days price change
5 Solana (SOL) SOL Solana predictions 59.6% 89 $185.65 -0.23% -1.09% $82 481 773 005 SOL 7 days price change
6 XRP (XRP) XRP XRP predictions 82% 31 $0.620836 0.23% 0.04% $34 074 125 944 XRP 7 days price change
7 USD Coin (USDC) USDC USD Coin predictions 90.8% 2 $1.000052 0.01% -0.02% $32 204 735 731 USDC 7 days price change
8 Dogecoin (DOGE) DOGE Dogecoin predictions 66% 68 $0.216785 17.43% 41.96% $31 141 765 281 DOGE 7 days price change
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15 Bitcoin Cash (BCH) BCH Bitcoin Cash predictions 70.8% 60 $568.92 13.87% 34.34% $11 197 169 068 BCH 7 days price change

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