The price of Bitcoin plummeted 20% in what experts are calling a bullish correction after topping out at all-time highs.
- Bitcoin plunged $7,000 from the top at $34,800 liquidating future longs worth over $1 billion.
- Ethereum also dropped 23% as over-leveraged long positions in the crypto market favored the bears.
- Despite negative prices, market sentiments continue to be positive.
Bitcoin and Ethereum prices dropped all the weekend gains before the traditional markets opened for trading Monday, liquidating $1.1 billion leveraged orders.
Nevertheless, market sentiments continue to wax bullish despite the carnage.
Bullish Bitcoin, Ethereum Selling
On Sunday at 5 PM CST, the CME futures market opened with a gap of $4,000 since closing at $29,385 before the holidays on Dec. 31.
Bitcoin crossed $30,000 for the first time over the weekend, topping at $34,800 this morning. However, the correction came just as quickly, as BTC prices dropped 20% around 1 AM CST.
Bitcoin futures on CME prices traced back to $28,440, filling the positive gap.
The volatility in Ethereum was even stronger as the second-largest cryptocurrency topped $1,150 for the first time in three years. The price of ETH, however, corrected 23% to $900 after peaking at $1,170.
Across exchanges like Binance and Huobi, over $1.1 billion were liquidated in the last four hours, with Bitcoin longs accounting for nearly 93.6% of the amount.
A 30-40% correction has been a standard in Bitcoin bull markets, which seldom run on over-leveraged longs across these platforms.
For example, the funding rate for Ethereum longs on BitMEX—even after the drop—is close to 474% annually. Similarly, for Bitcoin, the funding rates are running above 70% annually. Moreover, a quick recovery above $30,000 after the CME gap fill is seen as a robust bullish signal.
20% correction with larger players now at the table.
Buying this dip is a standard. $btc
— Cantering Clark (@CanteringClark) January 4, 2021
While the bullish market sentiments seem unhinged by the correction, the high funding rate for long orders on futures markets can act as a catalyst for additional correction. Todays’ low, around $27,750, will act as support for a positive trend.