On December 5th, Bitcoin’s price experienced a flash crash, plummeting to as low as $90,500. However, the cryptocurrency’s price has since recovered above the $100,000 mark, indicating a bullish trend.
A Brief Analysis of the Flash Crash
The flash crash occurred within one hour, during which the candle high and low values were $99,105 and $90,500, respectively. Bitcoin liquidations reached an astonishing $400 million during this brief period, making it the largest liquidation event since 2021.
Despite the significant decline in price, the funding rate reset is a major positive takeaway from the liquidation event. The open interest-weighted funding rate dropped from 0.09% on December 4th to 0.01% on December 6th. This indicates that the futures market has become relatively deleveraged compared to a few days ago.
Byzantine General’s Analysis
The anonymous trader, Byzantine General, stated that the funding rate reset and Bitcoin looks ‘really good.’ They highlighted the sharp decline in the funding rate, decreased aggregated open interest to the $95,000 level, and a drop in the aggregated spot premium. These factors indicate a relatively deleveraged futures market compared to a few days back.
The Trader’s Statement
If BTC just continues pumping after that liq cascade, that would be insane, and then there’s truly nothing that can stop this train.
Bitcoin Futures Metric Analysis
The chart below illustrates the funding rate reset and the decrease in aggregated open interest:
Chart: Bitcoin futures metric analysis. Source: Byzantine General
A Brief History of Bitcoin’s Spinning Top Candlestick Pattern
After the price volatility on December 5th, Bitcoin’s one-day chart saw the formation of a bearish spinning top candlestick pattern. A spinning top indicates a period of indecisiveness for the asset as both buyers and sellers push prices in opposite directions.
Coincidence or Not?
Coincidentally, this pattern has been observed at previous important milestones for Bitcoin. Charles Edwards, the founder of Capriole Fund, highlighted that Bitcoin acted similarly when it crossed $1,000 and $10,000, stating, ‘This is normal’ for BTC.
Bitcoin’s Price Volatility at Milestones
A similar bearish spinning top candle pattern was observed when BTC crossed $10,000 in December 2017 and witnessed severe price fluctuations after it crossed $1,000. On both occasions, the bearish volatility was short-term, and the price continued to move upward after these milestone targets were attained.
Fibonacci Extensions
Based on Fibonacci extensions, the immediate target for Bitcoin remains at $115,000, another 15% uptick from the $100,000 level. With the relative strength index (RSI) coiling under the overbought region, an aggressive breakout can take prices as high as $124,500, which falls three times higher with respect to the Fibonacci extensions’ swing low value of $90,500.
Conclusion
In conclusion, Bitcoin’s price has recovered above $100,000 after a flash crash. The funding rate reset is a major positive takeaway from the liquidation event, indicating that the futures market has become relatively deleveraged compared to a few days ago. With the RSI coiling under the overbought region, an aggressive breakout can take prices as high as $124,500.
Related Articles
- 4 new BTC price targets see Bitcoin over $124K by New Year
- Bitcoin futures premium hits 8-month high — Will the BTC rally continue?
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
Disclaimer
The information provided is for educational purposes only and should not be considered as investment advice. Readers are advised to do their own research before making any investment decisions.
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