Bitcoin experienced wild volatility overnight, which came after a flurry of selling activity unwound long positions and sent the price tumbling lower.
The sell-off was quite intense and resulted in the entire market being subjected to immense selling pressure that shows no signs of slowing down.
One analyst explains that the further development of the market will undoubtedly depend largely on the derivatives market.
He notes that funding rates are still quite high and could hinder the cryptocurrency’s prospects for the time being.
As such, he calls the cryptocurrency’s current positioning „dangerous“ – despite the strength of the recovery.
Bitcoin has seen another massive decline and recovery, which is common during parabolic moves to the upside.
One analyst states that he is now watching to see if the overall market continues to show weakness, commenting that high funding rates on margin trading platforms suggest that a wave of selling pressure could be imminent.
That being said, Bitcoin appears to be gaining strength from a technical perspective as its recovery from the overnight drop below $30,000 picks up steam.
Where the market moves next should provide some serious insights into the overall market’s medium-term outlook.
Bitcoin recovers from overnight slump
At the time of writing, Bitcoin is trading at $31,350. This is where it has been trading in recent days, but it marks a decline from its recent highs of nearly $35,000.
Where the market goes in the near future will undoubtedly depend on whether the bulls can confirm that the region below $30,000 is a strong support zone or not.
Continued trading above this area after the dip below this level would be a promising sign.
Analyst: BTC funding rates dangerously high
An on-chain analyst writes in a recent tweet that Bitcoin (Go to Bitcoin Buying Guide) is still in a dangerous position after the overnight drop because funding rates are still incredibly high.
He notes that while BTC could continue to rise in the short term, it may not be as strong as it looks.
„I am patiently waiting for the moment when the funding rate cools down. BTC could continue to rise, but it’s too dangerous.“
The coming days should shed some serious light on Bitcoin’s near-term prospects – and whether or not the cryptocurrency will be able to keep going up.