Bitcoin prices hit a ten-day low of just below $46,000 during the Tuesday morning Asian trading session. The asset now sits on solid support at the 200-day moving average and needs to maintain this level to prevent another painful decline.
BTC has lost around 30% from its Nov. 10 all-time high, but it is not the largest retracement of the year by any means. Between April and July, prices corrected by 54% before the bullish momentum returned.
On-chain analyst Willy Woo has created a heat map that shows a visualized representation of dip-buying. He noted that “it has been happening, it’s moderate, but most importantly, as yet there are no signs of a further sell-off cascade.”
Cryptographer and Blockstream CEO Adam Back added to the sentiment stating, “can confirm – been BTFD per usual, since the liquidation cascade. A nice new lower leverage base to build on.”
Buying the dip visualised (spot volumes seen on-chain). It has been happening, it’s moderate, but most importantly, as yet there’s no signs of a further sell-off cascade. Also worth keeping in mind longs have already been flushed. pic.twitter.com/j5cjUOIGmA
— Willy Woo (@woonomic) December 13, 2021
OI Signals Flush Out
Another signal that leveraged long positions have been flushed out is open interest (OI). This is a measure of the total number of outstanding derivative contracts that have not been settled. Derivatives markets have largely been responsible for Bitcoin’s volatility and rapid slumps in the past few years.
Over leveraged long positions can get liquidated quickly, which causes cascade sell-offs resulting in prices plummeting by thousands in a very short time. This is precisely what happened after April’s ATH and then again in September.
On-chain analytics provider, Glassnode, has been digging into the OI, noting that when it is high, it acts as fuel for futures-driven volatility. Over the past week or so, OI has tanked by around 50K BTC (roughly $2.5 billion).
The company reported that funding rates, which are payments made between long and short positions on perpetual futures markets, are only slightly positive at present and are not climbing.
“This adds further evidence that a large majority of ‘excessive’ leverage has been cleared from the market.”
Buying The Bitcoin Dip?
Bitcoin detractor Peter Schiff, who even said prices could reach $100K at one point, couldn’t resist having a dig as he does every time the asset prices decline. He asked the major BTC bulls if they were buying the dip this time around:
Hey guys, are you buying this dip yet? Or are you waiting for an even larger drop before buying more? I’m talking to you @saylor, @APompliano, @PeterMcCormack, and @nayibbukele. I think my son @SpencerKSchiff is already all-in on #Bitcoin, so thankfully he’s likely tapped out.
— Peter Schiff (@PeterSchiff) December 13, 2021
A number of respondents thanked him for the tip as his tweets usually come at the bottom of the dip, confirming that they had indeed bought more.
The next couple of days will be crucial in determining the next move. If support is lost, there could be an even bigger dip to buy.