Earlier this week, the Bitcoin (BTC) price fell sharply by around 30% (to about $31,000) as Wall Street bulls called for a technical correction, OKCoin reports.
However, the Bitcoin (BTC) price has already recovered significantly. The digital asset is trading at nearly $38,000 at the time of writing (having reached as high as around $42,000 earlier this month).
As noted in OKCoin’s latest crypto market report:
“Bitcoin finally took a breather this past week after the recent parabolic ascent … over the past few weeks. After peaking at $42,000 late last week, the cryptocurrency fell into the weekend. Bitcoin slipped from those highs to lows of $30,000 on Monday morning, marking a decline of nearly 30%, per OKCoin market data. The cryptocurrency has since recovered… after selling pressure abated at the $30,000 support level.”
Altcoins or alternative coins besides BTC also dropped this past week, with Ethereum (ETH) the second-largest crypto by market cap, shedding a significant amount of its value from its highs of $1,300+ to its trading price of around $1,125 at the time of writing.
As noted in the report, the correction in cryptocurrency prices came “amid a number of macroeconomic trends, including … a slight rebound in the U.S. dollar and a confirmation that Joe Biden will be the next President of the United States.”
Although Bitcoin is still trading considerably below the monthly high of $42,000, crypto analysts are quite confident that the long-term digital asset market trend “remains one of growth.” For example, Google Trends data shows that the search interest for terms or words such as “Bitcoin” and “Ethereum” is rising steadily and approaching its highest levels since 2017 (which was the time of the last historic crypto bull market).
As stated in the crypto market report, a major contributor to the “rapid” correction seen on Sunday (January 10, 2020) and Monday (January 11) was the “extremely over-leveraged nature of futures traders.” Before this correction, analysts had pointed out that the funding rates of Bitcoin futures exchanges were “far above the baseline 0.01% per eight hours,” the report revealed. It added that this “implied that long positions were more over-leveraged than their short counterparts.”
When the BTC price began to slide into Sunday (January 10), these long position holders “were forced to close their positions,” the report noted. It also mentioned that “coupled with decreased crypto market liquidity due to it being a weekend, the selling orders cascaded, resulting in the rapid descent to $34,000, then $30,000 by Monday (January 11) morning.”
The report further noted that “what was also absent was a lack of institutional buying pressure, which was a large theme of the rally over the past six weeks.” It added that “fortunately, a byproduct of the move is that it largely reset the extreme funding rates seen last week.” According to OKCoin’s analysis, this gives analysts “some peace of mind when it comes to considering what comes next for this market in the near term.”
Although it’s not entirely clear whether his statements may have led to the decline in the Bitcoin price, Guggenheim Investments CIO Scott Minerd had called for a Bitcoin price correction on Sunday (January 10) evening. After the initial drop from $42,000 to $35,000, Minerd stated:
“Bitcoin’s parabolic rise is unsustainable in the near term. Vulnerable to a setback. The target technical upside of $35,000 has been exceeded. Time to take some money off the table.”
Notably, Guggenheim Investments is a Wall Street investment fund that revealed in November and December 2020 that it believes there’s substantial long-term value in Bitcoin, the flagship cryptocurrency. Minerd told Bloomberg that he believes Bitcoin could reach $400,000 over an extended period of time. Miner thinks that Bitcoin’s scarcity and its potential ability to take a sizable share of gold’s market cap are key factors for why it could be a really valuable asset.