According to analysts at CryptoQuant, Bitcoin‘s price could experience another decline in value following its rebound from the weekend slide to $61,000, despite the current signs of strength.
In a recent post on Monday, Bitcoin and Ethereum trader GAAH expressed concern in the community’s “quicktake” that the bullish market feeling might be overheating, as indicated by data from the perpetual futures market.
Is Bitcoin Still Overheated?
The analyst pointed out that Bitcoin’s average funding rate over the past 30 days is still elevated, despite a recent price decline. These current rates are similar to those experienced during Bitcoin’s record-high prices in 2021, now acting as its most significant resistance level.
According to GAAH’s assessment, the price is confined within a clearly defined range that allows for approximately 20% fluctuations. This situation presents a favorable opportunity for larger investors to establish substantial holdings.
A significant bearish position for Bitcoin funding rates was last seen towards the end of 2022. At that time, the price of Bitcoin was only 25% of its current value. Since then, there have been several minor corrections causing around a 20% drop in price. However, unlike today, Bitcoin hasn’t experienced a funding premium during this period.
Many retail investors have been encouraged to sell their asset due to its sharp increase in value. The Short-Term Holders’ Spent Output Profit Ratio (SOPR) hit “greed” extremes in March but has since moved closer to a balanced state.
In the past, major profits taken by retailers have often signaled an approaching market peak, according to the analyst. Following the recent sharp price drop over the last two days, these retailers have significantly cashed out their holdings.
How To Spot The Next Bottom
James Check, an analyst at Glassnode, made a comment on Sunday about this metric. He pointed out that the recent drop below a 1.0 ratio is a positive sign for buyers, as short-term investors are experiencing greater losses than long-term ones. The market needs to get rid of its weaker players before it can advance further.
“Contrary investors may find value in SOPR (Spend Output Ratio), according to his recommendation. Keep an eye on the 1.0 level retest; a successful breach above this mark is what to aim for, rather than encountering resistance.”
The price decline of Bitcoin during the weekend caused about $700 million in liquidation events within 24 hours. It’s suspected that this market shift might have been instigated by intensifying tensions between Iran and Israel on the geopolitical stage.)
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2024-04-15 20:14