Bitcoin’s Value Drop and Funding Rate Cut: A Potential Buying Opportunity?
What Bitcoin Needs for an Uptrend
To see an uptrend, Bitcoin needs a significant decrease in value and a reduction in the funding rate. A buying signal could emerge when these two factors come together.
The Role of the Funding Rate
The funding rate of Bitcoin could play a crucial role in a possible price increase. It rose to 0.049% in early January as many traders went for leveraged long positions. This happened in anticipation of the decision of the US Securities and Exchange Commission (SEC) regarding the Bitcoin Spot ETF. However, the situation has since “cooled down” as the price of Bitcoin has fallen. The current funding rate is 0.001%, which, despite the recent price drop, indicates a bullish market.
The Need for a Capitulation
According to the pseudonymous CryptoQuant analyst MAC_D, a capitulation event must occur to end the current downtrend. This would result in a mass liquidation of long positions. “If the price drops sharply and the funding ratio on the 1-hour chart becomes negative, it could mean that leveraged traders are overly pessimistic about the market, which could be a good opportunity to buy back BTC,” notes the analyst.
Decrease in Profitable Transactions
Currently, Bitcoin is changing hands at a price of $39,956. Since the introduction of tradable Bitcoin ETFs on January 10, the value of the cryptocurrency has fallen by 13%. This price drop is due to increased profit-taking activity, which has led to an increase in reserves on the exchanges. Since January 10, the total number of Bitcoins held on exchanges has increased by 0.47%. According to CryptoQuant, 2.1 million Bitcoins are on the exchanges at the time of writing.
Conclusion
So, to see an uptrend, Bitcoin needs to experience a significant decrease in value and a reduction in the funding rate. A buying signal could emerge when these two factors come together. Despite the recent price drop, the market remains bullish, indicating a possible recovery.
Sources: CryptoQuant, CoinMarketCap, Santiment
| Symbol | BTC |
| Coin type | Alt Coin |
| Transaction Speed | Slow |
| Pros |
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| Cons |
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| Price | 55.663,00 € |
| Percent Change 24h | 3,73 % |
| Percent Change 7d | -7,41 % |
| Percent Change 30d | -9,23 % |
| Percent Change 60d | -6,33 % |
| Percent Change 1y | 109,46 % |
| Market Cap | 1.100.400.531.343,00 € |
| Max. Supply | 21.000.000 |
| Official Links | Website | Whitepaper | Source Code |
| Socials | Reddit | X | Message Board |
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