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Currently, bitcoin appears to be taking a breather after hitting a new all-time high (ATH) above $109,000 earlier this week. So far, the asset has seen slightly reduced bullish momentum and the price is just above $104,000.
However, despite the slowing bullish momentum, bitcoin's recent performance has sparked renewed interest in the market. CryptoQuant analyst Burak Kesmeci recently shared <a target="_blank" href="https://cryptoquant.com/insights/quicktake/6790fbcbc09a2f3ea00c366a-Binance-bitcoin-Funding-Rates-Insights-from-Past-Bull-Cycles” target=”_blank” rel=”nofollow”>perspectives on bitcoin price behavior and key market indicators, shedding light on possible future movements.
In a recent post on the CryptoQuant QuickTake platform, Kesmeci's analysis focused on Binance bitcoin funding rates, a metric that provides notable clues about market sentiment and dynamics.
By reviewing historical data from previous bull cycles, he identified three distinct phases that can serve as a framework for interpreting the current market environment.
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What's next for bitcoin based on funding rates?
According to Kesmeci, during the 2020-2021 bull run, Binance bitcoin funding rates went through three distinct phases:
Phase 1 (July 2020): Funding rates remained stable at 0.01 for weeks before demand increased. This phase acted as the “calm before the storm,” taking bitcoin from $9,000 to $12,000 as funding rates rose to 0.10.
Phase 2 (November 2020): After an initial rally, bitcoin underwent a correction. Funding rates briefly turned negative before turning positive, supporting bitcoin's rise from $12,000 to $19,000.
Phase 3 (December 2020): When bitcoin surpassed its previous highs and crossed the $60,000 mark, funding rates increased significantly, reflecting strong market support.
Currently, Kesmeci notes that Binance bitcoin funding rates are at the base level of 0.01, which is consistent with the early stages of a bull cycle. The analyst wrote:
Looking at recent data, I believe we have completed the first two phases of this bull cycle. For the third phase, I will be watching to see if Binance bitcoin funding rates rise above 0.01.
The analyst mentioned that a sustained rise above the 0.01 level would suggest further activity in the futures market and could lead to another significant bullish move.
However, Kesmeci also warns that high funding rates are often unsustainable and that markets tend to correct through “prolonged squeeze” events that restore equilibrium.
Key metrics and divergences in the market
In a separate analysis, another CryptoQuant analyst, TraderOasis explored several critical metrics, including the Coinbase Premium index, open interest, and funding rates. These indicators give an idea of the health of the bitcoin market and its possible direction.
TraderOasis highlighted a divergence between the Coinbase Premium Index and bitcoin price movement. While the asset reached a new peak above $109,000, the Coinbase Premium index formed a lower high. This lack of alignment raised concerns about the sustainability of the current price trend.
Additionally, a divergence between open interest and price also suggested that the market might lack the solid foundation needed for continued bullish momentum. According to TraderOasis, a healthy uptrend requires these metrics to be more aligned, which would indicate strong investor confidence and a stable market structure.
Regarding funding rates, TraderOasis noted recent bearish sentiment among traders. However, he noted that such conditions often precede sharp price movements.
The analysis suggested the possibility of an initial bullish spike to shake off the bearish positions, followed by a subsequent pullback. This pattern, if realized, could set the stage for a more sustainable long-term uptrend.
Featured image created with DALL-E, TradingView chart
