Analysis: Bitcoin's key support level is near $89,200, and traders are still using leverage to buy the dip

BlockBeats News, January 9, according to CoinDesk, Bitcoin rebounded from its low to around $90,500 after briefly dipping to about $89,300, testing support near the 50-day moving average (around $89,200). This marks the third consecutive day of pullback for Bitcoin, after it surged to nearly $95,000 on Monday. Crypto trading firm Wintermute stated that the main reason for Bitcoin's decline is low trading volume, combined with traders taking profits.

Jake Ostrovskis, Head of OTC Trading at Wintermute, said: "After the initial risk appetite rebound at the start of the year, the market failed to break through the key $95,000 level, resulting in two-way volatility over the past two days, with ETF outflows dominating." In addition, the market is also affected by the recent continuous downward revision of the Federal Reserve's rate cut expectations. According to CME FedWatch data, as of now, the probability of a rate cut at the January 28 Federal Reserve meeting is only 11.6%, compared to 15.5% a week ago and 23.5% a month ago.

Derivatives positions show that market leverage is rising. Meanwhile, the funding rate for Bitcoin perpetual contracts remains positive at around 0.09%, indicating that longs are paying shorts to maintain their positions. A consistently positive funding rate during a pullback means traders are still using leverage to buy the dip. When prices fail to move higher, this concentrated long position structure increases the risk of long liquidations, as even a mild decline could force leveraged traders to close positions, resulting in additional selling pressure.