Bitcoin Futures Funding Rates Point to Potential Price Correction - Prime Buying Opportunity Ahead?
Summary:
Periodic payments between traders of Bitcoin futures, known as funding rates, may indicate a potential price correction for Bitcoin. Analysts suggest this could provide prime buying opportunities. Analysts from CryptoQuant also noted a Coinbase premium rise, indicating active Bitcoin buying by U.S. institutions. Despite Bitcoin's continuous plunge causing a significant downturn in the crypto market, with last week marking a 9% decline, analysts believe that such corrections are normal and often precede a strong bull run.
Periodic payments between traders who take long and short positions on Bitcoin futures, known as funding rates, may be indicating a possible Bitcoin price correction on the horizon. This could create prime opportunities for purchase, suggest analysts. A recent April 3 post by a CryptoQuant analyst on platform X reported that record-high positive Bitcoin futures funding rates reflect a potent bullish sentiment.
Futures funding rates represent periodic payments exchanged between traders, based on the disparity between the perpetual futures contract price and the spot price of BTC. If the Bitcoin futures price exceeds the spot prices, long position traders pay the funding rate to the shorts. The opposite happens when the futures price is less than the spot; shorts pay longs the funding rate.
However, historically, such optimism usually precedes price corrections, pointed out analyst 'Crypto SunMoon', adding that the eventual dip could present an ideal buying occasion. In addition to these projections, CryptoQuant analyst 'Maartunn' noted a rising Coinbase premium, indicating active purchase of Bitcoin by U.S. institutions. The aforementioned premium is the price differential between Coinbase and other global exchanges.
Evidence of the crypto market's substantial decline, attributed to Bitcoin's continuous drop, was noted by crypto derivatives tooling provider 'Greeks Live' earlier this week. As a result of plummeting futures premium levels, market-wide panic ensued.
The past week saw a decline of approximately 9% in BTC, hitting a low just under $65,000 on April 2. Presently, this is 10.5% less than BTC's $73,738 all-time high on March 14. Tony Sycamore, market analyst at IG, anticipates a potential further drop. In an April 4 post on X, Tony Sycamore predicted a fall to support around $60,000 or even less.
Analyst and trader 'Moustache' reassured his 112,000 followers on platform X, stating that a correction around BTC's all-time high is "entirely normal". Drawing parallels with similar occurrences in 2020, he noted that such correction led to a significant bull run after the all-time high was surpassed. He recalled how BTC receded around 17% to approximately $61,500, a week after its all-time high, before successfully reclaiming $71,500 in late March and then witnessing another dip in April.
Published At
4/4/2024 6:55:05 AM
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