When Will Bitcoin Downtrend End? This Signal Could Be One To Watch
24 Januar 2024 - 3:00PM
NEWSBTC
An analyst has explained that a futures market signal could be one
to wait for before the latest Bitcoin drawdown can finish. Bitcoin
Funding Rates Are Still In The Positive Territory As pointed out by
an analyst in a CryptoQuant Quicktake post, the BTC funding rate
has been reducing recently, but it’s still at positive levels. The
“funding rate” refers to an indicator that keeps track of the
amount of periodic fee that futures contract holders are exchanging
between each other currently. When the value of this metric is
positive, it means that the long traders are paying a premium to
the short holders right now in order to hold onto their positions.
Such a trend suggests that a bullish mentality is dominant in the
futures market. Related Reading: Analyst Says “Rapid Price
Recovery” Is Likely For Bitcoin, Here’s Why On the other hand, the
indicator being negative implies a bearish sentiment may be shared
by the majority of the traders as the shorts are outweighing the
longs at the moment. Now, here is a chart that shows the trend in
the Bitcoin funding rate over the past year: Looks like the value
of the metric has been positive in recent days | Source:
CryptoQuant As displayed in the above graph, the Bitcoin funding
rate has been almost entirely positive since mid-October,
suggesting that the longs have been the dominant force in the
sector. Around the start of the year, the metric’s value had hit
especially high levels, but after all the volatile price action BTC
has seen since then, the indicator has considerably cooled off. The
funding rates have still been at positive levels recently, however,
implying that traders haven’t given up on their bullish sentiment
just yet. This may not entirely be ideal for the asset to rebound.
According to the quant, for the ongoing Bitcoin downtrend to end,
“we need to wait for a capitulation signal from market
participants.” In the chart, the analyst has highlighted the last
few instances such a capitulation signal appeared for the
cryptocurrency. Such negative spikes for the funding rate imply
that the traders have become overly pessimistic about the market.
Historically, BTC has tended to move against the expectations of
the majority, so it’s not surprising that bottoms have been more
likely to form when the traders have been highly bearish about the
asset. Related Reading: XRP Buy Signal That Resulted In 60% Rally
Has Gone Off Again Red spikes in the indicator like those shown in
the chart may not always perfectly coincide with a low in the
price, but they are still nonetheless a sign that tides could
change for the coin. At present, the Bitcoin funding rates are
still at positive levels, so some more downtrend may need to occur
in the price, before these longs are liquidated and the futures
balance shifts towards the other side. BTC Price Bitcoin had
plunged under the $39,000 mark just yesterday, but the coin appears
to have bounced back today as it’s now once again floating above
$40,000. The price of the asset seems to have made some recovery
over the past day | Source: BTCUSD on TradingView Featured image
from Shutterstock.com, charts from TradingView.com, CryptoQuant.com
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