Bitcoin’s price has bounced back impressively, now above $95,000, marking a 12% surge this week. However, concerns arise with negative funding rates in the derivatives market indicating a lack of confidence in this rally. Analysts suggest that while a short-term pullback may happen, it could potentially strengthen the market long-term if it leads to healthier accumulation.
Bitcoin’s price has experienced a notable rebound recently, climbing from a low of $74,000 to over $95,000. This surge marks a 12% increase within just seven days, hinting at a potential shift in market sentiment after a spell of correction and price fluctuations. However, certain indicators suggest that caution remains prevalent among investors, particularly in derivatives trading.
Analyst ShayanBTC from CryptoQuant has flagged a concerning divergence between Bitcoin’s price growth and its funding rates in the perpetual futures market. Funding rates are essential as they reflect trader sentiment, highlighting whether the market is leaning more towards long or short positions. Despite Bitcoin’s price rally, ShayanBTC indicates that many traders seem to be hedging against possible declines, reducing their exposure even as prices rise.
The problematic divergence raises the question of whether the current price rally can hold or if it’s bound for a brief pullback before a genuine upward trend resumes. ShayanBTC noted that funding rates have turned negative once again, which correlates with Bitcoin approaching the $95,000 resistance level. Such negative funding rates typically signal that short positions or hedging strategies are more prevalent among traders.
This trend recalls the market landscape seen from March to October 2024, when funding rates lingered in negative territory throughout several price rallies. Analysts suggest this renewed divergence might indicate uncertainty regarding the sustainability of the rally, as traders prepare for potential reversals at critical resistance levels.
ShayanBTC also pointed out that the current market structure resembles previous scenarios, whereby transient pullbacks occurred before the market resumed its upward trajectory. Traders might be engaging in risk-reduction or distribution tactics, which means selling while prices rise. This sort of cautious positioning amidst increasing prices may indicate a market imbalance, possibly triggering a short-term correction.
An additional metric to consider is Bitcoin’s Short-Term Holder Realized Price (STH-RP). This figure indicates the average cost basis of recently acquired Bitcoin, shedding light on the macro trend for the cryptocurrency. Reliable data suggests that sustainable bull markets tend to keep prices above the STH-RP.
Currently, Bitcoin is hovering close to this STH-RP threshold, and whether it can break above or remain at this level is crucial for determining the immediate momentum. In conclusion, ShayanBTC’s analysis suggests that a short-term pullback seems plausible, but if it happens, the divergence between rising prices and falling funding rates could enhance market structural integrity if it leads to stronger accumulation and removes weaker hands from the market.
