After Bitcoin peaked at $10,600 late on Saturday evening, bears reasserted control over the cryptocurrency. Now, BTC trades for $10,300, having dropped as low as the low-$10,200s as sellers suddenly entered the market.
This was a departure from the expectations that analysts had for Bitcoin just hours before the move. Many thought that the move above $10,500 after days of ranging was set to take BTC towards $11,000.
While this didn’t play out, there are signs that the ongoing correction is one that is too aggressive. That’s to say, there’s a good likelihood Bitcoin will bounce from here.
Bitcoin Could Soon Bounce, Derivatives Data Suggests
It appears that derivatives traders led Bitcoin on Sunday morning.
According to ByBt, a crypto derivatives tracking site, a majority of Bitcoin margin exchanges have negative funding rates at the moment. The funding rate is the fee that longs pay shorts to normalize the price of the derivative to the price of the underlying asset; when the funding rate is negative, that suggests that shorts are pushing down the price, as the derivative is trading below the spot market.
BitMEX currently has a negative funding rate of 0.0328% per eight hours, which is far below the baseline of 0.01% per eight hours. Other leading markets such as OKEx and Huobi, are also currently negative.
Notably, Ethereum’s futures markets are also printing negative funding rates, which is something only seen when derivatives sellers are putting on extremely heavy pressure.
Negative funding rates are often seen before Bitcoin bounces. By the same token, extremely positive funding rates are often seen before Bitcoin undergoes a correction.
All Eyes on Legacy Markets
Bears may be able to keep up the downward pressure if legacy markets, like the stock market and the foreign currency market, open red in the coming hours.
As has been seen over the past few weeks, legacy markets dropping has an adverse effect on the price of Bitcoin and cryptocurrencies.
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