Analysis: The key support level for Bitcoin is around $89,200, and traders are still using leverage to buy on dips.

On January 9, according to CoinDesk, Bitcoin rebounded from a low to approximately $90,500, after initially dipping to around $89,300, testing support near the 50-day moving average (about $89,200). This marks the third consecutive day of a pullback for Bitcoin, which previously surged close to $95,000 on Monday. Crypto trading firm Wintermute stated that the main reason for Bitcoin’s decline was low trading volume combined with traders taking profits. Wintermute’s OTC trading head Jake Ostrovskis said, “After the initial risk appetite recovery following the market open at the beginning of the year, the market failed to break through the key $95,000 level, leading to two-way volatility over the past two days, with ETF fund outflows dominating.” Additionally, the market is also influenced by the ongoing downward revision of the Federal Reserve’s rate cut expectations. According to CME FedWatch data, the probability of a rate cut at the January 28 Federal Reserve meeting is only 11.6% so far, down from 15.5% a week ago and 23.5% a month ago. Derivatives positions indicate that market leverage is increasing. Meanwhile, the funding rate for Bitcoin perpetual contracts remains around 0.09% positive, indicating that longs are paying shorts to maintain their positions. The persistently positive funding rate during the pullback suggests traders are still using leverage to buy the dip. When prices fail to advance further, this concentrated long position structure increases the risk of forced liquidations, as even mild declines could compel leveraged traders to close their positions, adding to selling pressure.