Bitcoin’s Pullback Comes to a Stop as Traders Lower Leverage

2 min readNov 17, 2021
Bitcoin's Pullback Comes to a Stop as Traders Lower Leverage
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BTC’s technical indicators point to an upward trend.

On Wednesday, Bitcoin’s price remained stable around $60,000, after falling about 15% from an all-time high of $69,000. Due to improving blockchain data, several analysts remain bullish on BTC’s price, implying that the current downturn could be short-lived.

In a blog post, Jan Wuestenfeld, an analyst at CryptoQuant, said “The drop seems to be related to excessive leverage in the system being flushed out”. “As long as on-chain fundamentals do not change on these price corrections, the medium-term outlook remains bullish,” Wuestenfield wrote.

BTC’s technical indicators suggest a favorable rising trend, implying that on pullbacks, buyers may remain active. In the immediate term, however, the $63,000-$65,000 price range may limit future gains.

Prices as of today

Bitcoin (BTC) is currently trading at $60,374, up 0.85 percent.Ether (ETH) is currently trading at $4,257, up 1.17 percent.S&P 500: $4,688, -0.26%$1,866 per ounce of gold, up 0.8%.The yield on the 10-year Treasury note ended the day at 1.59 percent.

Liquidations with a high leverage

The graph below depicts bitcoin (BTC) and ether (ETH) financing rates (the cost of maintaining long positions in perpetual futures traded on major exchanges). The recent increase in funding rates indicated a growing appetite for leverage among traders, some of whom were exposed to liquidations as prices fell.

Bitcoin and ether funding rates (Delphi Digital)

According to Joo Kian, an analyst at Delphi Digital, a crypto research organization, funding rates have reset near neutral zone as markets consolidate around present levels.

“Prior to this, open interest was at peak levels for most trading pairs; typically, flushing out excessive leverage is healthy for markets over the longer term,” Kian said.

Separately, open interest (contracts that have been traded but have not yet been liquidated by an offsetting deal) in the bitcoin options market is around all-time highs last seen in March and April, which preceded a big price decrease. It’s feasible that open interest may stay at present levels for another month before BTC’s price begins to fall.

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