The price of Bitcoin fell suddenly by 2.5% after reaching $19,570 in an overnight rally.
3 reasons why Bitcoin simply fell after failing to break US$19.5K again
The price of Bitcoin (BTC) rose above $19,500 briefly on December 15, reaching a high of $19,570 at Binance. However, BTC fell to US$19,050 in three hours, registering a sudden drop of 2.5%.
Bitcoin soared to around US$19,600 with the impetus of its recovery and negative funding rates in the future market. But it rejected the same level of decline since November due to whale selling pressure.
Bitcoin’s 1-hour price chart (Coinbase). Source: TradingView.com
A movement of relief was expected
As the Cointelegraph reported on 12 December, technical indicators showed that the BTC was oversold after falling below US$17,600.
The four-hour candle chart saw a bullish divergence and a TD9 buying indicator, signaling that selling pressure had run out.
The price of Bitcoin recovered quickly above US$18,000 and continued its run after US$18,300. BTC then, breaking the key resistance level of the whale cluster at US$18,800, further fuelled its momentum.
Encouraged by the recovery from the Crypto Engine relief, Bitcoin continued to climb, reaching US$19,570 at major exchanges.
Negative future financing rates fed BTC
Futures financing rates at Binance Futures and other major platforms became negative when Bitcoin began to recover above $18,000.
The funding rate for Bitcoin futures contracts becomes negative when there are more short sellers than buyers. This means that the probability of a short squeeze increases, which can cause a sudden peak in buyer demand.
Although the financing rate was negative for a short period, as the Bitcoin financing rate rarely turns negative, it was an indication of aggressive selling.
Bitcoin futures short activity. Source: Hyblock Capital
A trader alias known as „Byzantine General“ pointed out that short sellers were highly aggressive during the high. A move above $19,300 would squeeze many short positions, he added:
„The shorts were really aggressive again and are now under water. Break the $19,300 and they will be pressed hard. ”
Once Bitcoin surpassed US$19,300, it quickly reached US$19,570, suggesting that a big squeeze occurred.
Exchanges see the return of Bitcoin whales
Despite the strong recovery, Bitcoin had a large liquidation above US$19,500 when the whales made a profit.
Ki Young Ju, the CEO of CryptoQuant, said on Dec. 15 that he is reducing his position due to the increase in whale deposits for exchanges. He said:
„Profit realised at US$19,250 and changed from long generation (10x) to long normal (1x). Looking at the average flow of exchanges (MA 144 blocks), the $BTC whales are depositing on exchanges. I think the whales need more time to profit here. ”
Since then, Bitcoin has fallen below US$19,100, consolidating under the US$19,400 resistance area once again.
In the short term, the key to Bitcoin is to remain above the $18,800 support level. As the Cointelegraph reported, this maintenance of level would be a bullish signal that may propel the BTC to a new historic high.