Bitcoin futures financing rate (BTC) overtook Derinit’s Binance Futures on December.18, according to data from CryptoQuant. Historically, when this happened, the dominant cryptocurrency saw a local peak or consolidation.
The funding rate of major cryptocurrencies, including Bitcoin and Ether (ETH), rose significantly in the last 48 hours. This typically indicates that the future market is overheating, which increases the likelihood of withdrawal.
What comes next for Bitcoin?
Bitcoin has already seen a relatively modest downside and some consolidation after its recent rally.
Within two days, from December 16 to 17, the price of Bitcoin rose from $ 19,300 to as high as $ 23,800 on Binance. Following a 23% price hike, a 3% to 4% correction is relatively small, compared to historical corrections after a large rally.
Bitcoin’s downside was bound to happen as the futures financing rate surpassed 0.1% on December 18 across major exchanges.
Bitcoin futures market uses a system called “finance” to find market equilibrium. If there are more long contracts in the market, the funding rate becomes positive. If so, long sellers or contract holders must pay short sellers, and vice versa.
On December 18, the funding rate surpassed 0.1% on Bybit and other leading exchanges for the first time since the November rally to $ 19,000. At the time, after the future market overheated, BTC saw a significant downside to $ 16,000.
A 20% to 30% disadvantage was likely at the time because the funding rate was consistently high. This time, the funding rate has cooled relatively quickly. As such, the chances of consolidation rather than correction are higher, especially as new retail investors are still largely on the sidelines, other data shows.
A pseudonym of a cryptocurrency noted that Binance Futures’s financing rate overtook Deribit.
While this data has no specific relevance, historical trends show that when it does, Bitcoin tends to withdraw. The trader He said:
“Looks like most of the times Binance funding overtakes Deribit funding we are allowed to move to the local side or top. It could be “retail FOMO peak signal.”
One reason behind this trend might be the significance of Binance Futures as a way to gauge overall market sentiment.
When the price of Bitcoin sees a large price movement, Binance Futures often sees large liquidations due to its high open interest.
Binance Futures consistently remains one of the top three futures exchanges through open interest alongside CME and OKEx.
So when Binance Futures begins to show signs of overheating momentum, the market could turn cautious in the near term.
The near-term roadblock is $ 23,350
In the short term, traders identify the $ 23,350 resistance level as the key roadblock for Bitcoin.
Technical analyst Cantering Clark said that if Bitcoin surpassed $ 23,350, an increase would likely occur. He He said:
“Yesterday’s entire structure spent almost all of its time within the value of a previous day. The previous day was balanced towards the tail end of the day. Looks very clean so far, good at daytime break. set up if we clear 23350. Play the range until switchover. “