On December 5, Bitcoin’s price experienced a flash crash, plummeting to as low as $90,500 in just one hour. However, the cryptocurrency has quickly recovered and surpassed the $100,000 mark.
The Flash Crash: A Brief Look at the Numbers
- The candle high and low values during the crash were $99,105 and $90,500, respectively.
- Bitcoin liquidations reached a staggering $400 million, making it the largest liquidation event since 2021.
- Despite this decline, the open interest-weighted funding rate reset, dropping from 0.09% on December 4 to 0.01% on December 6.
The Funding Rate Reset: A Positive Indicator for Bitcoin
Byzantine General, a renowned Bitcoin futures analyst, highlighted the significance of the funding rate reset and its implications for the market:
The funding rate reset is a positive indicator for Bitcoin. It shows that the market is deleveraging, which means that investors are reducing their exposure to the asset. This can lead to a more stable price movement.
A Look at the Technical Analysis: Bearish Spinning Top Candlestick Pattern
The one-day chart of Bitcoin displays a bearish spinning top candlestick pattern after the flash crash. This pattern indicates indecisiveness in the market, as both buyers and sellers are pushing prices in opposite directions.
Charles Edwards, founder of Capriole Fund, pointed out that this pattern is not uncommon for Bitcoin:
This is normal for Bitcoin. We’ve seen similar patterns when it crossed $1,000 and $10,000. The price fluctuations after these milestones were short-term, and the price continued to move upward afterward.
Fibonacci Extensions: Identifying Potential Targets
Using Fibonacci extensions, analysts have identified two potential targets for Bitcoin’s price movement:
- Immediate target: $115,000 (15% uptick from the $100,000 level)
- Aggressive breakout target: $124,500 (three times higher than the swing low value of $90,500)
Conclusion
Bitcoin’s swift recovery above $100,000 after the flash crash is a testament to its resilience. The funding rate reset and the bearish spinning top candlestick pattern on the one-day chart are indicators that the market is deleveraging and potentially setting up for an upward price movement.
However, it’s essential to remember that every investment and trading move involves risk. It’s crucial to conduct thorough research before making a decision.
Additional Insights:
- The relative strength index (RSI) is coiling under the overbought region, indicating a potential aggressive breakout.
- The aggregated spot premium has dropped, indicating a decrease in demand for Bitcoin.
- Analysts are cautious about predicting the market’s next move, but some are optimistic that the price will continue to rise.
Sources:
- Byzantine General
- Charles Edwards (Capriole Fund)
- Cointelegraph/TradingView
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