After reaching the $100,000 milestone, bitcoin suffered a sudden price drop on Friday, resulting in an estimated 7% price loss. During this decline, the asset's perpetual funding rates in derivatives markets were affected. However, traders may still retain enough leverage to strongly influence price volatility.
bitcoin's Near-Term Prospects Uncertain Due to Higher Leverage
in a<a target="_blank" href="https://x.com/glassnode/status/1865057300374782278″ target=”_blank”> x publication of December 6 Blockchain analysis firm Glassnode expressed that bitcoin's perpetual funding rate may have significant implications for the short-term price of the asset.
For context, perpetual funding fees are periodic payments made between traders in the perpetual futures market to ensure that the contract price aligns with the spot price of bitcoin. Positive funding rates indicate that long positions are paying off short positions, which is bullish, while negative funding rates represent the opposite.
According to Glassnode, btc perpetual funding rates initially showed signs of stabilization on its weekly timeframe amid speculative demand. However, the asset's rise to $100,000 on Thursday driven by increased market leverage saw these funding rates rise to 3.6 times their weekly average.
<img class="wp-image-658694 size-large" src="https://technicalterrence.com/wp-content/uploads/2024/12/Bitcoin-Traders-Maintain-High-Leverage-Amid-Falling-Funding-Rates-–.jpeg" alt="bitcoin” srcset=”https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=1800 1800w, https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=460 460w, https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=768 768w, https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=860 860w, https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=1536 1536w, https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=750 750w, https://www.newsbtc.com/wp-content/uploads/2024/12/GeICYZCXwAAhqHC.jpeg?w=1140 1140w” />
Notably, bitcoin's perpetual funding rate hit a high of 0.062, marking its highest value since April. Importantly, the Glassnode analysis team notes that this rate increase suggests a significant influence of the derivatives market on bitcoin's rise above $100,000.
However, bitcoin's price flash resulted in a major drop in its funding rates slightly above 0.024. Despite this drop, Glassnode claims that these rates are still relatively high compared to earlier this week, indicating that the bitcoin market still contains a significant level of leveraged positions.
This residual leverage in the market indicates strong potential for further price volatility. Therefore, bitcoin price movement in the coming days seems unclear as a reversal on either side could trigger a significant level of liquidation, inducing a cascading effect.
STH cost basis points to $112,000 price target
In other news, renowned analyst Alí Martínez has <a target="_blank" href="https://x.com/ali_charts/status/1865035309559247227″ target=”_blank”>aware a bitcoin price prediction based on the short-term holder cost (STH) of the asset, that is, the average price at which btc was typically acquired over the last 155 days. It indicates an equilibrium level for these investors.
According to Martínez, the behavior of STH indicates that bitcoin would reach a local maximum or price of $112,926 based on a standard deviation of +1 that adjusts the cost level of STH upwards to take into account price volatility and trends. behavior.
At press time, bitcoin is trading at $100,137 after its recovery from Friday's decline faced a rejection at $102,000. Meanwhile, the trading volume of the asset has decreased by 42.46% and is valued at $89.12 billion.
x/s2lkBSp4/” alt=”bitcoin” />
