• Bitcoin started a downside correction and traded below the $22,200 level.
  • The weekly and daily RSI are bullish.
  • Current funding rate indicating a further bitcoin price drop.

Many market watchers, especially on Twitter, seem to think that Musk removing 75% of bitcoin from Tesla’s balance sheet is at least partially responsible for the recent slump in bitcoin’s price.

During the last week the bitcoin price movement was notably bullish, reaching a high of $24,276. Tesla then announced that it had sold over $900 million dollars worth of bitcoin to strengthen its cash position. This bearish news shook the crypto community as Musk had mentioned in the past he wasn’t going to sell bitcoin. However, the Tesla CEO said that this sale was not a verdict on his belief in bitcoin.

Is the Market Taking Musk by His Word?

It would seem not as bitcoin fell down from its previous mid-week highs and was trading around $22,300 on Sunday, going down by one percent over the previous 24 hours. Regardless of the seemingly bad news, market observers say that bitcoin’s tenacity to stay above $22,000 amid the raging inflation rates and slowing economic indicators is positive news. When the news of Tesla selling over 75% of its bitcoin holdings broke, many expected this to crash bitcoin’s price; but bitcoin held strong and this is another positive sign for the bulls.

Early Monday morning saw a fresh decline with bitcoin’s price falling below the $22,000 level after it failed to settle above the $23,000 zone. This is equivalent to a fall of around 2% although bitcoin’s price is still up 5% in the last week. An initial support is at the $21,650 level while the next major support is near the $21,500 zone and below this the price could fall even lower. An immediate resistance is at $22,500 while the next major resistance above which could see the price regain its bullish momentum is at $23,000

RSI Flashes Bullish Signals

The RSI has moved outside its oversold territory which is bullish. This movement is similar to what happened at the end of 2018, when the bear market bottomed out. Could history be repeating itself? The bullish trend would be confirmed if the RSI breaks out above its descending trendline and moves above 50. Since its July high on the 21st, the three-hour chart shows that bitcoin has been trading inside a descending parallel channel.

The Funding Rate and What that Means for Bitcoin’s Price

The bitcoin funding rate according to on-chain data is relatively high. The funding rate, which is an indicator that measures the periodic fee that traders in the Bitcoin futures market have to pay each other, suggests that the price of bitcoin is in a new decline. By analyzing a chart that shows the trend in bitcoin funding rates over the last six months, we see that whenever the bitcoin funding rate has reached a relatively high positive value, a decline in price occurs not too long after.

Why is that the case? High positive funding rate values indicate that longs are piling up in the market, so if a decline occurs suddenly and is significant enough it can liquidate a lot of long positions. A few days ago, bitcoin was above $23,000 and when the funding rate peaked, the price subsequently went down. The current value is still quite high, signaling that there might be more downside to come.