Key Points
- Bitcoin’s (BTC) price drop is causing a reset of several key metrics and flushing out leverage.
- Bitcoin’s relative strength index (RSI) readings on daily timeframes have returned to the 50 midpoint.
Bitcoin’s price has been fluctuating around $66,000 after a 5% drop in a single hourly candle. The price of Bitcoin may have dropped by 7% in April, but this retest of support is having a calming effect on the heated markets.
Liquidation Impact
The recent drop triggered a significant liquidation event, which at the time of writing, amounted to $400 million for Bitcoin and other cryptocurrencies combined. This has resulted in funding rates turning negative, according to data from monitoring resource CoinGlass.
Popular trader Jelle commented that prices are dropping and funding rates are plummeting as a result. He added that Bitcoin and Ethereum margined contracts are already in the negatives and that all leverage must be destroyed before price discovery.
Shift in Funding Landscape
Trading firm QCP Capital noted the significant change in the funding landscape in its latest “Asia Morning Color” market updates. The firm attributed the speed of the move to large liquidations on retail-heavy exchanges like Binance, which saw perp funding rates go from as high as 77% to flat.
QCP Capital also noted that while perp funding has compressed, the rest of the forward curve remains very elevated. They questioned whether this would be the move to bring the whole curve back down.
Bitcoin’s RSI readings on daily timeframes have returned to the 50 midpoint, which is an important line during uptrends. Bitcoin delivers its strongest performance when the RSI is above 70 — corresponding to an “overbought” signal for price.
Volatility and Bollinger Bands
In terms of volatility, Bollinger Bands on daily timeframes are indicating a fresh pre-breakout phase for Bitcoin. Analyst Matthew Hyland drew comparisons to February, stating that daily Bollinger Bands continue to tighten to levels not seen since the move started from $45k.
In late December 2023, it was reported that both RSI and Bollinger Bands were demanding an acceleration of the bull market.
