Analysis suggests that Bitcoin's key support level is around $89,200, and traders are still using leverage to buy on dips.

According to ChainCatcher, Bitcoin has rebounded from its lows to around $90,500, after dipping to around $89,300 and testing support near the 50-day moving average ($89,200). This marks the third consecutive day of pullback for Bitcoin, after it surged to nearly $95,000 on Monday.

Cryptocurrency trading firm Wintermute stated that the main reason for Bitcoin's decline was low trading volume coupled with profit-taking by traders. Jake Ostrovskis, head of over-the-counter trading at Wintermute, said, "After an initial recovery in risk appetite following the start of the year, the market failed to break through the key $95,000 level, resulting in two-way volatility in trading over the past two days, while ETF outflows dominated." Furthermore, the market was also affected by the continued downward revision of expectations for interest rate cuts by the Federal Reserve.

According to CME FedWatch data, as of now, the probability of a rate cut at the Fed meeting on January 28th is only 11.6%, compared to 15.5% a week ago and 23.5% a month ago. Derivatives positioning shows that market leverage is rising. Meanwhile, the funding rate for Bitcoin perpetual contracts remains positive at approximately 0.09%, indicating that longs are paying shorts to maintain their positions. A consistently positive funding rate during pullbacks suggests that traders are still using leverage to buy on dips. When prices fail to rise further, this concentrated long position structure increases the risk of longs being liquidated, as even a mild decline could force leveraged traders to close their positions, creating additional selling pressure.