Bitcoin Eyes Bull Revival as Dip Below $54K Wipes Out Millions More in Leverage

Bitcoin has erased the losses from its latest price dip and could soon see more gains as normalcy returns to the derivatives market.

Having hit a low of $53,350 during the Asian hours the cryptocurrency is trading 1% higher on the day near $56,200 at press time, according to CoinDesk 20 data. Selling pressure faded near the widely tracked monthly volume-weighted average price (VWAP) of $53,000.

The market now looks ready for a fresh move higher, as the bitcoin perpetual futures funding rate – the cost of holding long positions calculated every eight hours – has dropped sharply from 0.124% to 0.08% after excess bullish leverage was wiped out by the cryptocurrency's pullbacks Monday and Tuesday.

Long trades worth $1.16 billion were liquidated on Monday, the most since Feb. 22, according to data provider Coinalyze. And with today's drop, another $368 million-worth were liquidated by major exchanges.

With the lower funding rate, a more sustained move toward record highs could be seen – more so, as global stocks continue to rally with risk sentiment being supported by fundamentals, according to a tweet from Holger Zschaepitz, a markets commentator and economics author.

Further, many U.S. citizens scheduled to receive $1,400 stimulus checks this week could invest part of the cash received into bitcoin, boosting its price. As per a Mizuho Securities survey, nearly $40 billion of the latest round of stimulus checks could be spent on bitcoin and stock purchases.

Technical charts are also suggesting scope for a price bounce.

The 14-hour relative strength index (RSI), a momentum indicator, formed a higher low early today, decoupling from the downtrend in prices. That "bullish divergence" indicates the pullback has run out of steam.

Also read: Diginex Anticipating Bitcoin Rise to $175K by End of 2021: CEO

That said, fresh chart-driven selling may be seen if the cryptocurrency drops below the monthly VWAP support at $53,000.