By Yasin Ebrahim

Investing.com – bounced sharply Monday, as investors took advantage of the rout in the popular crypto, but bets in derivative markets suggests wild swings in either direction remain in play.  

MicroStrategy was one of the most prominent bitcoin investors. It acquired 7,002 bitcoins, worth approximately $414.4million.

After falling to a low Friday of $53,569, the price rose 5.9% to $58,243.  

Bitcoin’s plunge last week can be largely attributed to the uncertainty surrounding Covid-19, which rattled investors who were looking for risk-based assets.

Although the announcement of Covid-19’s new variant has prompted investor jitters, an in-depth look at the Bitcoin network and speculative positions on BTC suggests that a selloff had already begun before the news.

“I would say things looked incrementally more bearish before the sell off as funding rates had collapsed, which is a good indicator that leverage is going the other way from a previous market cycle,” Michael Bucella, partner at BlockTower Capital told Investing.com on Monday

The average funding rate, which is a measure of sentiment in perpetual swaps markets, fell from around 0.04 to 1.3% after an all-time high BTC price.

A swing in one direction or the other is possible, even though funding rates are near neutral. “Funding rates suggest an only slightly positive bias, making both a long- or short- squeeze plausible scenarios,” Glassnode said in a weekly report. 

There is uncertainty, however, whether long-term holders will continue to sell, but their current holdings are more profitable than in the prior correction seen in September, which could possibly give them greater conviction to hold, or “hodl.”

“Both long and short-term Holders are holding more profitable supply than September’s correction, which can generally be viewed as constructive for price,” Glassnode added.