Data analyst: Bitcoin funding rates could spell trouble for near-term outlook ๐จ This article is 4 years old...
Data analyst: Bitcoin funding rates could spell trouble for near-term outlook
2 min read
Updated: Aug. 13, 2020 at 7:40 pm UTC
Photo by Gemma Evans on Unsplash
It has been a turbulent week for Bitcoin. This past weekend, the cryptocurrencyโs buyers attempted to catalyze a movement up towards $12,000, eventually pushing it as high as $12,200.
At this point, however, it faced an influx of selling pressure that caused its price to begin sliding down towards the lower-$11,000 region.
Overnight, however, buyers were able to absorb this selling pressure and stop the cryptocurrency from seeing any significant downside.
Despite the strong rebound from its daily lows, one data analyst is now expressing caution when it comes to the cryptoโs near-term outlook.
He is noting that high funding across the market suggests bulls are still overextended, making it easier for bears to fuel a downside movement.
This could also lead to a โcascade of liquidationsโ in the near-term.
Bitcoin posts strong rebound after sliding below $11,200ย
At the time of writing, Bitcoin is hovering within the mid-$11,000 region as its buyers attempt to reverse the losses that were posted yesterday.
The recent downtrend led the crypto to lows of $11,150 and struck a blow to investor sentiment โ as many highly bullish altcoins posted massive losses as a result of this drawback.
Structurally, however, BTC remains in a similar spot to where it has been for the past week.
The key support at $11,000 held strong, and it has yet to post any type of breakdown.
That being said, the cryptocurrency still needs to surmount $12,000 if it is to see any further upwards momentum in the coming days and weeks.
A sustained bout of trading beneath this level may degrade its technical strength and open the gates for further downside.
Data analyst: High BTC funding rates a grim sign for its near-term outlook
One fundamental factor that could hamper Bitcoinโs growth in the near-term is its high funding rate on margin trading platforms.
This means that it is costly to be in a long position due to the high demand for upside exposure from traders.
When funding rates hit extremes, this is often a telltale sign that a movement in the opposite direction is imminent.
Data analyst Theta Seek spoke about this in a recent post, explaining that high funding presently suggests Bitcoin may soon see further downside.
โDespite being highly subdued, the funding rate remains positive even as BTC [looses] close to 7% in 24 hours. This implies 2 things: 1) The market is highly leveraged which could lead to further cascading liquidations 2) Bulls who longed at 12K are still in denial at this dump.โ
Until this metric begins normalizing, Bitcoin could be at risk of seeing a sharp selloff fueled by a torrent of long positions being liquidated.
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.