A leading crypto analytics firm is warning that one key metric is flashing bearish for the top crypto by market cap Bitcoin (BTC).
Santiment says that Bitcoin’s funding rate may be on the verge of turning negative, which would indicate a market downtrend.
Crypto investors can take leveraged long or short positions in futures contracts that never expire. In order for markets to maintain funding, periodic payments are required based on the difference between the perpetual contract market and the spot price, which is known as the funding rate.
Says Santiment,
“We can zoom in on just Bitcoin’s funding rate on Binance, the largest platform for perpetual contract rates. At the moment, traders are looking as long as they’ve consistently been over the past month. And with prices historically moving the opposite direction of funding rates, given enough time elapsing, this is a bit concerning.”
Santiment is also tracking social media trends, which can provide useful data some traders use to try and predict Bitcoin’s price action.
“Looking at social data first, we’re seeing a trend that you’ll like to see if you’re a crypto bull. Over the past five weeks, traders have gradually become less and less optimistic toward the top assets in crypto. We have backtested years of data and have found that prices historically move in the direction of the crowd’s least expectations. When traders are showing more and more doubt, it increases the probability of continued price rises.”
However, Santiment says discussions on social media platforms are declining overall.
“Right now, we can see that there is a declining amount of BOTH bullish and bearish candles from the crowd. In fact, there are less participants engaging in discussion on Twitter, Discord, Telegram, and Reddit compared to the beginning of the year. This decline simply means the crowd doesn’t know what to think. Generally, declining crowd interest even as prices rise usually means there is some disbelief going on.”
Bitcoin is trading for $28,293 at time of writing, down 2.9% in the past 24 hours.
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