QCP Capital analysts have raised concerns that the recent rise in perpetual futures funding rates suggests the cryptocurrency market may be at risk of unexpected downside movements. This trend is occurring as traders leverage positions amidst a speculative bullish trend.
According to the analysts, "The perpetual futures funding rate across Deribit and Binance has increased in the past two weeks, a sign that bearish bets are decreasing or longs are building. This, combined with the froth in memecoins, makes us wary of moves to the downside, as these often happen when markets are bullish and least expect it."
The price of Bitcoin futures funding has remained predominantly positive since the beginning of October, as highlighted by Coinglass data.
The analysts noted a potential shift in market dynamics driven by increased activity in the memecoin sector. They view this as a signal of heightened speculation, stating, "There is some froth in the memecoin market as traders capitalize on the latest trends."
Despite the potential for a brief sell-off in an over-leveraged market, the analysts maintain a bullish medium- to long-term outlook. They recommend accumulation strategies that enable investors to gradually increase their holdings over time, even in the face of short-term uncertainties. "We look to continue accumulating despite short-term dips, as we believe risk-off selloffs will be short-lived," they explained.
As traders face these volatile conditions, BRN analyst Valentin Fournier noted that investors are currently hesitant and seeking clearer guidance. He emphasized the importance of the upcoming U.S. Consumer Price Index (CPI) report on Thursday, followed by the Producer Price Index (PPI) on Friday, which is expected to inject volatility into the market. "Should inflation show signs of decreasing as anticipated, Bitcoin could see another upward push," Fournier remarked in an email sent to The Block.
The CPI report for September is expected to indicate that inflation continues to soften, primarily due to falling energy prices. Economists predict a 0.1% rise in consumer prices for September, following a 0.2% increase in August, which could bring the overall inflation rate down to 2.3% from 2.5% in August, thereby reinforcing the U.S. Federal Reserve's recent pivot to a rate-cutting cycle.
Bitcoin's price has fallen by approximately 1% in the last 24 hours, hovering around $62,072 as of 8:10 a.m. ET, according to The Block’s Bitcoin Price Page. The current global cryptocurrency market cap stands at $2.27 trillion, reflecting a 1.5% decrease in the past day. The total cryptocurrency trading volume in the last day is $82.7 billion, with Bitcoin dominance at 54.2% and Ethereum dominance at 12.9%, based on Coingecko data.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures also invests in other companies within the crypto space. Crypto exchange Bitget serves as an anchor LP for Foresight Ventures. The Block operates independently to provide objective, impactful, and timely information about the crypto industry.
