Critical Level in Bitcoin: Apocalypse Scenarios in the Range of $90,000-$100,000 - Coin Bulletin

Bitcoin (BTC) has not dipped below the $90,000 level since Nov. 18, and price action is stuck in the $90,000-$100,000 range.**

The movements within this narrow range frequently change investors' sensitivity. When Bitcoin approaches $100,000, the market usually leans towards a bullish trend, but fears of a bear market increase when the price drops to $90,000.

It is stated that the movement of the Bitcoin price in this congested range creates an equilibrium state that will cause maximum pain to market participants. Derivatives in particular, namely futures and options, seem to play an important role in these fluctuations.

Funding Rate and Market Movements

The futures perpetual funding rate, a metric often followed to assess the impact of derivatives markets, plays a critical role in understanding the causes of these fluctuations. When the funding rate is positive, long positions pay short positions; When it's negative, short positions pay long positions.

Positive funding rates are usually seen in bull markets and supported by the expectation of price increases. However, in overheated markets, prices can fall, leading to liquidation waves. Similarly, in bear markets, when negative funding rates occur, there can be a sudden recovery when prices approach the bottom.

Glassnode data showed that the funding rate dropped to -0.001% for the first time this year. This slight negative rate led to a leverage cleaning among market participants and Bitcoin price rose above $94,000 again. However, compared to sharp negative rates such as -0.309% seen during the Covid-19 crisis in 2020, this rate remained quite low.

Are Negative Rates Falling or Approaching the Bottom?

Negative funding rates do not always mean that prices will immediately recover. On the contrary, they can also indicate that the market may be in a longer-lasting downtrend. However, these rates are often seen at points where price bottoms are formed. For example, during the Silicon Valley Bank crisis in 2023, Bitcoin's funding rate briefly turned negative, and then prices quickly recovered.

Analysts point out that, in addition to funding rates, other technical indicators should also be monitored. During this process, the complacency of the bulls or the overconfidence of the bears can cause sudden liquidation waves in the market. In the event this week, the bears were liquidated, and the price recovered.