Analysis: Bitcoin's key support level near $89,200, traders still buying on dips with leverage

According to CoinDesk, Bitcoin rebounded from its low point to around $90,500, after briefly dipping to around $89,300, testing the support level near the 50-day moving average ($89,200). This marks the third consecutive day of Bitcoin pullback, after reaching close to $95,000 on Monday. Crypto trading firm Wintermute stated that the main reason for Bitcoin's decline is low trading volume, coupled with traders taking profits. Wintermute's OTC trading head Jake Ostrovskis noted that after the initial rise in risk appetite following the year's opening, the market failed to break the key $95,000 level, resulting in two days of volatile trading, with ETF outflows dominating. Additionally, the market is also influenced by the ongoing expectations of a Fed rate cut. According to CME FedWatch data, the probability of a rate cut at the January 28 Fed meeting is now only 11.6%, down from 15.5% a week ago and 23.5% a month ago. Derivatives data shows that leverage in the market is increasing. Meanwhile, the funding rate for Bitcoin perpetual contracts remains positive at around 0.09%, indicating longs are paying shorts to maintain positions. The continued positive funding rate during the pullback suggests that traders are still buying on dips with leverage. However, this concentrated long position structure increases the risk of longs being liquidated, as even a mild decline could force leveraged traders to close positions, adding selling pressure.

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