One analyst has explained that a signal from the futures market could be expected before bitcoin's latest drawdown can end.
bitcoin Funding Rates Still in Positive Territory
As noted by an analyst at CryptoQuant Quicktake btc-Funding-Ratio-Waiting-for-Market-Capitulation” target=”_blank” rel=”nofollow”>mail, the btc funding rate has dropped recently but is still at positive levels. The “funding rate” refers to an indicator that tracks the amount of periodic fee that holders of futures contracts currently exchange with each other.
When the value of this metric is positive, it means that long traders are paying a premium to short holders right now to maintain their positions. This trend suggests that a bullish mentality predominates in the futures market.
On the other hand, the fact that the indicator is negative implies that most traders may share a bearish sentiment, as shorts outperform longs at the moment.
Now, here is a chart showing the trend in bitcoin funding rate over the past year:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/01/When-will-Bitcoin39s-bearish-trend-end-This-sign-could-be.png" alt="bitcoin funding rates” width=”1280″ height=”806″ loading=”lazy” data-recalc-dims=”1″/>
Looks like the value of the metric has been positive in recent days | Source: btc-Funding-Ratio-Waiting-for-Market-Capitulation" target="_blank" rel="nofollow">CryptoQuant
As shown in the chart above, bitcoin's funding rate has been almost completely positive since mid-October, suggesting that longs have been the dominant force in the sector.
Earlier in the year, the metric's value had reached especially high levels, but after all the volatile price action btc has seen since then, the indicator has cooled considerably.
However, funding rates have still remained at positive levels recently, implying that traders have not yet abandoned their bullish sentiment. This may not be entirely ideal for the asset to recover.
According to the quant, for bitcoin's current bearish trend to end, “we have to wait for a sign of capitulation from market participants.” In the chart, the analyst highlighted the latest cases in which a signal of capitulation appeared for the cryptocurrency.
These negative funding rate spikes imply that traders have become too pessimistic about the market. Historically, btc has tended to move against majority expectations, so it is not surprising that bottoms have been more likely to form when traders have been very bearish on the asset.
Red spikes on the indicator like those shown on the chart may not always perfectly coincide with a bottom in price, but they are still a sign that the tides could turn for the coin.
Currently, bitcoin funding rates are still at positive levels, so a new downtrend in price may need to occur before these long positions are liquidated and the futures balance is liquidated. move to the other side.
btc Price
bitcoin had plummeted below the $39,000 mark yesterday, but the coin appears to have recovered today as it is now floating above $40,000 again.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/6YPBFFFK/" alt="bitcoin price chart” width=”1534″ height=”868″/>
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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