Three reasons why Bitcoin collapsed after surpassing $19,500
Bitcoin’s price suddenly contracted by 2.5% after peaking at $19,570
In the past few hours, the price of Bitcoin (BTC) has significantly increased, surpassing $19,500 and reaching a peak of $19,570 on Binance. However, in the next three hours BTC returned to around $19,050: a sudden contraction of 2.5%.
Bitcoin surged to nearly $19,600 thanks to the momentum of its relief rally and loud Immediate Edge the negative funding rate in the futures market. However, it has hit a wall at the same level as the November contraction, due to heavy selling pressure from whales.
Bitcoin was oversold
Technical indicators showed Bitcoin was oversold when the price slipped below $17,600. The 4-hour candlestick chart showed a bullish divergence and a TD9 „buy“ indicator, highlighting that the selling pressure had been exhausted.
Bitcoin’s price quickly recovered, first exceeding $18,000 and then $18,300. The cryptocurrency then broke through the key resistance level (whale cluster) at $18,800, further fuelling its momentum.
Supported by the relief rally, Bitcoin continued to climb to a peak of $19,570 on the major exchanges.
Negative Funding Rate Fueled BTC’s Growth
The funding rate for futures on Binance Futures and other major platforms turned negative as soon as Bitcoin began its recovery above $18,000.
The funding rate of futures contracts goes negative when there are more sellers than buyers; this increases the likelihood of a short squeeze, which could suddenly increase demand for purchases.
Although the funding rate went negative for a short period – as Bitcoin’s funding rate rarely goes negative – it was indicative of very aggressive selling.
On Twitter, trader „Byzantine General“ pointed out the extreme aggressiveness of short sellers during the relief rally. He then predicted that a move above $19,300 would cause a short squeeze:
„The shorts have been very aggressive again and are now underwater. If 19,300 was breached, there would be a big short squeeze.“
As soon as Bitcoin hit $19,300, the price quickly surged to $19,570: Byzantine General’s prediction seems to have come true.
Bitcoin’s whales return to the exchanges
Despite the excellent recovery, Bitcoin faced a big sell-off above $19,500 due to whales confirming their profits.
Today Ki Young Ju, CEO of CryptoQuant, announced that he would be reducing his positions due to the increase in deposits on exchanges by whales:
„I confirmed profits at $19,250 and switched from generational long (10x) to normal long (1x). Looking at the average inflow on all exchanges (144-block MA), BTC whales are depositing. I think the whales will need some time to realize their profits. […]
Unpopular opinion: don’t buy the f*ck out of dip. There are too many whales on the exchanges.“