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Bitcoin Bounces Back Above $31K After Monday's Drop
Analysts say the bitcoin market now looks less overheated than it did on Monday.
Updated Sep 14, 2021, 10:51 a.m. Published Jan 5, 2021, 11:48 a.m.
Bitcoin is trading higher on Tuesday, and the bull market is looking less overheated than it did a day ago.
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At press time, the top cryptocurrency by market value is changing hands near $31,590, representing a 5% gain on a 24-hour basis. Bitcoin had dipped by 15% to near $28,000 during Monday's European trading hours.
The sudden sell-off happened after the average perpetual funding rate (the cost of holding long positions) on major derivatives exchanges rose to an 11-month high of 0.137%, implying excess bullish leverage.
"The bitcoin futures market was very over-leveraged and overcrowded before the drop," analyst Joseph Young noted in a Substack post, adding the market now looks less overheated with funding rates having dropped.
The average now stands at 0.039%, according to data provided by the blockchain intelligence firm Glassnode. Further, major exchanges liquidated $936 billion worth of long positions on Monday – the highest in at least eight months – wiping out excess leverage.
Sentiment remains bullish
Bitcoin's swift recovery from Monday's low indicates dip demand, a sign of the bullish mood in the market.
"The Coinbase premium reappeared as bitcoin began to recover, which is a good sign," Young noted. "This means high-net-worth investors in the U.S. took advantage of the drop and bought bitcoin."
The options market continues to paint a bullish picture amid the high price volatility, with the one-, three-, and six-month put-call skews hovering well into the negative territory, according to data source Skew.
Put-call skews measure the cost of puts (bearish bets) relative to calls (bullish bets). Meanwhile, on-chain metrics show scope for a continued price rally.
While bitcoin's market value to realized value (MVRV) Z-score has risen to a three-year high of 5.32, it remains well below the 7.0 level at which an asset is considered near a top, per Glassnode. Historically, above-7.0 readings have marked an end of bull markets.
According to trader Alex Kruger, Monday's low of $28,154 could turn out to be this week's bottom, especially if the U.S. Democrats sweep Tuesday's Georgia elections and gain control of the Senate.
A Democrat-controlled Senate would pave the way for more significant fiscal stimulus, according to Goldman Sachs. Fiscal stimulus is inflationary in nature and would likely strengthen the long-term bull case of scarce assets such as gold and bitcoin.
Also read: Crypto Markets Jump on OCC Approval for Banks to Use Blockchains
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Trading activity softened in March as market uncertainty grew amid escalating tariff tensions between the U.S. and global trading partners. Centralized exchanges recorded their lowest combined trading volume since October, declining 6.24% to $6.79tn. This marked the third consecutive monthly decline across both market segments, with spot trading volume falling 14.1% to $1.98tn and derivatives trading slipping 2.56% to $4.81tn.
- Trading Volumes Decline for Third Consecutive Month: Combined spot and derivatives trading volume on centralized exchanges fell by 6.24% to $6.79tn in March 2025, reaching the lowest level since October. Both spot and derivatives markets recorded their third consecutive monthly decline, falling 14.1% and 2.56% to $1.98tn and $4.81tn respectively.
- Institutional Crypto Trading Volume on CME Falls 23.5%: In March, total derivatives trading volume on the CME exchange fell by 23.5% to $175bn, the lowest monthly volume since October 2024. CME's market share among derivatives exchanges dropped from 4.63% to 3.64%, suggesting declining institutional interest amid current macroeconomic conditions.
- Bybit Spot Market Share Slides in March: Spot trading volume on Bybit fell by 52.1% to $81.1bn in March, coinciding with decreased trading activity following the hack of the exchange's cold wallets in February. Bybit's spot market share dropped from 7.35% to 4.10%, its lowest since July 2023.
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Solana CME Futures Fell Short of BTC and ETH Debuts, but There's a Catch
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