Bitcoin and the broader cryptocurrency market are currently undergoing a significant downturn, with BTC dropping to a low of $94,550 today. This comes after Bitcoin briefly touched the six-figure price range earlier this month, reaching $102,720 just yesterday. The sudden bearish turn has led analysts to investigate on-chain indicators in search of potential triggers.
Shayan, a verified author at the analytics platform CryptoQuant, has highlighted a decrease in Bitcoin funding rates in the derivatives market as a key factor. Funding rates reflect the demand for Bitcoin derivatives and play a crucial role in maintaining price trends. Typically, a strong rally is accompanied by an increase in funding rates, signaling strong demand.
However, Shayan pointed out that the recent surge in Bitcoin’s price did not receive significant support from funding rates in the initial stages, with rates only spiking midway through the rally. This delay indicates a lack of market commitment, making Bitcoin susceptible to price corrections.
The hesitancy in the market and capital outflows can be observed in the rally that pushed Bitcoin to an all-time high in December 2024. For example, data from Coinglass indicates that the Bitcoin Open Interest Weighted Funding Rate was at 0.0906% on December 5, 2024, when Bitcoin was trading at $102K. Despite Bitcoin’s price continuing to rise, the rate dropped notably as Bitcoin faced rejection at $108,300 on December 17, 2024.
This decline signifies a decrease in traders’ commitment, with many doubting Bitcoin’s ability to sustain its upward momentum. Shayan confirmed that the drop in funding rates indicates not only capital outflows from the derivatives market but also a lack of support to maintain the bullish trend.
Leveraged traders displayed little interest in holding their positions as Bitcoin traded in the six-figure range, fearing a significant correction. This led to broader market hesitancy, further pressuring Bitcoin’s price. Yesterday, with Bitcoin above $102K, the funding rate dropped from 0.0113% to 0.0044%.
The current trend suggests a potential test of lower price levels. Shayan warned that if Bitcoin fails to hold above the $90K level, it could face increased selling pressure, causing deeper corrections and potentially revisiting lower Fibonacci levels or psychological price thresholds. However, a recovery in funding rates and renewed buying activity could stabilize Bitcoin and continue its upward trajectory.
As of now, Bitcoin is trading at $95,060, indicating the possibility of further declines.