According to CryptoQuant data, the Bitcoin (BTC) futures interest rate was obtained by Deribit on December 18th. Historically, when this happened, the dominant cryptocurrency experienced a local ridge or consolidation.
The funding ratio for major cryptocurrencies, including Bitcoin and Ether (ETH), has skyrocketed in the past 48 hours. This usually indicates that the futures market is overheated, which increases the likelihood of a withdrawal.
What’s next for bitcoin?
Bitcoin has already experienced a relatively small decline and some consolidation since the last rally.
In two days, from December 16 to December 17, Bitcoin on Binance grew from $ 19,300 to $ 23,800. After a 23% rise in prices, the 3% to 4% correction is relatively small compared to the historical corrections after the big rally.
Bitcoin’s plunge was bound to happen as the future funding ratio on major stock exchanges peaked at 0.1% on December 18.
The bitcoin futures market uses a system called “funding” to find equilibrium in the market. If there are several long-term contracts in the market, the funding rate will be positive. In this case, buyers or holders of long-term contracts must pay the short sellers and vice versa.
On December 18, the funding ratios on Bybit and other leading exchanges topped 0.1% for the first time since November to reach $ 19,000. At the time the futures market warmed up, BTC plummeted to $ 16,000.
At the time, a decline of 20% to 30% was likely as the funding rate remained generally high. This time, the funding ratio declined relatively quickly. Thus, the chances of a consolidation rather than a correction are higher, especially since new retail investors are largely left on the sidelines, as other data show.
A cryptocurrency trader indicated that Binance Futures’ funding rate exceeds Deribit.
While this data is not very significant, historical trends show that when it does, Bitcoin tends to decline. The merchant said:
“It seems that most of the time Binance funding exceeds Deribit funding, we get sideways movement or local peak. This could be the “peak retail FOMO”.
One reason for this trend may be the importance of Binance Futures as a way to measure market sentiment in general.
When Bitcoin’s price fluctuates a lot, Binance Futures often sees large settlements due to higher open interest rates.
Binance Futures has consistently remained one of the top three open-interest futures exchanges alongside CME and OKEx.
Therefore, as Binance Futures begins to show signs of fever, the market may become more cautious in the short term.
Short-term barrier – USD 23,350.
In the short term, traders identify the $ 23,350 resistance level as the main obstacle for bitcoin.
Visualize a bitcoin exchange order book. Source: Cantering Clark
Technical analyst Kantering Clark said that if Bitcoin crosses $ 23,350, a trend is likely to follow. He said:
“Yesterday’s structure spent almost all its time on the previous day’s value. The previous day was in equilibrium with the end of the day. While it looks very clean, it’s good inside today’s break. Setting if we clear 23350. Work area to change. “