3 Reasons Bitcoin Price Is Rapidly Recovering From Its Severe 23% Correction

Bitcoin rallied quickly from $ 44,800 to over $ 50,000 in less than 22 hours and here are three key reasons why.

The price of Bitcoin (BTC) quickly recovered from around $ 44,800 to more than $ 50,000 in just 22 hours.

Behind the rapid recovery are three main factors, including low funding rates, the $ 170 million purchase of Bitcoin from Square, and the stabilization of the spot market.

Bitcoin Futures Funding Rates Fall Substantially

On major futures exchanges including Binance, Bybit, and Bitfinex, Bitcoin’s funding rate has dropped to 0.01%.

The Bitcoin futures funding rate was consistently above 0.1% for the entirety of the rally from $ 40,000 to $ 58,000.

When the futures funding rate is high, it means that the market is crowded with buyers and the rally is likely to have spread too far.

This creates a significant risk of a long squeeze, which can cause the price of Bitcoin to drop rapidly in a short period.

With the funding rate back at 0.01%, the risk of a long contraction is significantly lower and if a new uptrend occurs, the rally could be more sustainable.

Square buys $ 170 million worth of BTC

On February 24, the American company Square bought Bitcoin worth 170 million dollars. This comes after buying $ 50 million worth of Bitcoin on October 8 of last year. At the time, Square’s CFO Amrita Ahuja said:

“We believe that bitcoin has the potential to be a more ubiquitous currency in the future. As its adoption grows, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that path. “

Square’s additional purchase of Bitcoin has significant significance because it shows that the company trusts BTC in the long term.

The price of Bitcoin is substantially higher than it was in August last year, indicating that as its price increases, so does the confidence of institutions.

The spot market is stabilizing

When the price of Bitcoin was correcting, the price of Bitcoin on spot exchanges, such as Coinbase, was much lower than futures exchanges.

On February 23, for example, Bitcoin was trading $ 600 lower on Coinbase at a time when the price was near $ 44,800.

When the price of Bitcoin initially rallied from $ 44,800 to $ 48,000, there were signs of a further bearish test.

John Cho, Director of Global Expansion for GroundX, said:

“We expected it, but we didn’t think it would come so soon or that fast. A solid bounce from here would be ideal; but I’m looking at some regions of potential retracement support. My bias is towards the 40-41k region as it would meet a correction of the 30% of the ATH “.

The price of Bitcoin has rallied above $ 50,000 since then, and that could have reduced the likelihood of a retest bearish and the possibility of further downsides.

In the short term, if Bitcoin continues above $ 50,600, which has become a support area, the probability of a rally towards the next resistance level at $ 56,000 increases.

Lastly, such corrections are quite normal for a Bitcoin bull market cycle, as Cointelegraph previously noted. In fact, they were commonplace during the 2017 bull market, which had nine major pullbacks between 20 and 40%. But despite these recurring “severe” corrections, the price of Bitcoin still rose 20 times from its previous all-time high during that year.

Reference:es.cointelegraph.com

Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin

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