Key Points

Bitcoin's price decrease has led to a reset in various key metrics and the reduction of leverage. The relative strength index (RSI) readings for Bitcoin on daily timeframes have returned to the midpoint of 50.

The price of Bitcoin has been hovering around $66,000 following a 5% drop in a single hourly candle. Although Bitcoin's price dropped by 7% in April, the retesting of support seems to be bringing a calming effect to the heated markets.

Impact of Liquidation

The recent decline initiated a significant liquidation event, resulting in a total of $400 million for Bitcoin and other cryptocurrencies. This has caused funding rates to turn negative, as reported by monitoring data from CoinGlass.

A well-known trader, Jelle, pointed out that prices are falling and funding rates are declining accordingly. He mentioned that Bitcoin and Ethereum margined contracts are currently in the negative, emphasizing the need to eliminate all leverage before price discovery can take place.

Changes in Funding Environment

In its latest market update "Asia Morning Color," trading firm QCP Capital highlighted the noticeable shift in the funding landscape. They attributed the speed of the move to substantial liquidations on exchanges heavily populated by retail investors like Binance. Perpetual funding rates on these exchanges have dropped significantly, from as high as 77% to being almost at zero.

QCP Capital also acknowledged that while perp funding rates have decreased, the rest of the forward curve remains high. They questioned whether this adjustment would bring the entire curve back down.

Bitcoin's RSI readings on daily timeframes have returned to the midpoint of 50, a crucial level during uptrends. The best performance by Bitcoin is typically observed when the RSI surpasses 70, indicating an "overbought" signal for price.

Volatility and Bollinger Bands

Regarding volatility, Bollinger Bands on daily timeframes are signaling a new pre-breakout phase for Bitcoin. Analyst Matthew Hyland compared the situation to February, noting that daily Bollinger Bands are tightening to levels not witnessed since the price movement began from $45,000.

In late December 2023, reports suggested that both RSI and Bollinger Bands were signaling an acceleration of the bull market.