Bitcoin price surpassed its all-time high at Christmas, reaching $ 24,681 on Binance. After the strong rally for BTC, traders and analysts are investigating short-term bullish and bearish cases.
Market sentiment on Bitcoin remains largely positive, but analysts are raising some concerns for the foreseeable future. The next step is unclear.
The funding rate of Bitcoin futures
Bitcoin (BTC) is up over $ 24,600 with a small value Reduction of the short position. In the past four hours Only short contracts worth $ 95 million were signed. This suggests that this rally was not triggered by a decrease in the short position. A short position throttling occurs when there are many short contracts or sell orders in the futures market. This occurs when sell orders are overfunded, meaning that traders are aggressively selling Bitcoin with borrowed capital.
Since the rally was not caused by a short throttle, the futures market was dominated by buyers and holders of long contracts. This trend resulted in the refinancing rate on the major Bitcoin futures exchanges reaching 0.1%. The funding rate is a mechanism that futures exchanges use to motivate long or short contract holders based on market sentiment. With longer contracts, the financing rate becomes positive, which means that buyers must incentivize sellers.
The average funding rate of the Bitcoin futures contract on most exchanges is 0.01%. If the funding rate is 0.01%, the trader must pay 0.01% of their position as an incentive for short sellers who are the minority of the market. However, as the funding rate increases and merchants who buy Bitcoin have to pay high funding fees, it becomes less attractive to bet on Bitcoin for long.
Currently, on December 25, 2020, the financing rate for Bitcoin futures is 0.1%. Traders and strategists therefore say that Bitcoin is exposed to pushback risk as it has become less attractive, at least in the short term. Mohit Sorout, the founding partner of Bitazu Capital, he showed Bitcoin’s extremely high funding rate, suggesting a withdrawal, is likely: “I would be very surprised if USDbtc continued to rise from here.”
Edward Morra, a cryptocurrency derivatives trader, I know repeated a similar feeling. He added that many traders in the futures market started buying bitcoin after it hit $ 24,400. After the decline, Mora expects the financing rate to return after a local correction. Morra tweeted: “Derivatives traders didn’t buy the dip, they were on the rise again, classic. Now the Spot Chads will remove them, send the rewards and funding to the baseline, and proceed after a local correction. “
However, some traders disagree that the futures funding rate is of paramount importance during a strong bull run. Salsa Tekila, a pseudonymous bitcoin trader, found that BTC’s funding rate in the bull market reached 0.375% in 2017. Considering that the price is much higher, but arguably at an earlier stage in the rally, the dealer said that the funding rate alone may not be accurate to predict a ceiling:
“It seems extremely stupid to miss out on the uptrend in pricing, which is based entirely on funding, while waiting for a Wyckoff cap. In the upward trend in 2017, funding was 0.375 (high) for weeks. “
Given Bitcoin’s historical price cycle so far Traders are more cautious when predicting a peak in the short term. This leads to a bullish fall for BTC for the foreseeable future, centered around the theory that historical trends may not repeat themselves during a bull market.
The short-term bullish fall for Bitcoin
The short-term uptrend in Bitcoin is based on two main factors: the institutional accumulation and profits of altcoins surpassing Bitcoin. Both trends continue as grayscale entries continue to rise while altcoins lag behind BTC.
Ki Young Ju, CEO by CryptoQuantsaid he expected bitcoin to correct itself if institutional buying slows down. Until then, however, we can see what is visible when evaluating the managed grayscale assets and the CME futures data. Do. said what would maintain its bullish bias: “If the institutional buying stops, the price will likely fall sharply. The new all-time high would be determined by institutional investors if they stopped buying USDBTC. Until then, I will maintain my bullish bias. “
according to Grayscale, the company’s total assets under management (AUM), is approximately $ 16.3 billion, of which more than $ 14 billion came from the Grayscale Bitcoin Trust (GBTC). GBTC AUM is viewed as a metric for determining institutional sentiment regarding BTC as it is often the first entry point for institutions to enter the Bitcoin market, especially in the US.
The combination of Bitcoin’s strong institutional build and the dry liquidity of the altcoin market reinforces the short-term bullish argument for Bitcoin. Santiment, an on-chain market analysis company, tweeted:: “Liquidity in the vast majority of #cryptoassets outside of USDBTC and USDETH was rapidly declining towards the end of the year.” This shows that most of the interest in cryptocurrencies is still centered on Bitcoin.
According to the exchange heatmaps of the material indicators The next big resistances for Bitcoin are $ 25,000 and $ 30,000. Sell orders are stacked above the two levels which can result in a temporary pullback once these resistance areas are reached. Until then, sentiment regarding Bitcoin remains strong given the high institutional demand and the lagging altcoin market.