The Bitcoin (BTC) futures financing rate on Binance Futures exceeded the Derivative on December 18, according to data from CryptoQuant. Historically, when this happened, the dominant cryptocurrency saw a local top or consolidation.
The financing rate of major cryptocurrencies, including Bitcoin and Ether (ETH), has increased considerably in the last 48 hours. This usually indicates that the futures market is overheating, which increases the likelihood of a withdrawal.
What’s next for Bitcoin?
Bitcoin has already seen a relatively small pullback and some consolidation since its recent rally.
Within two days, between December 16-17, the price of Bitcoin rose from $ 19,300 to $ 23,800 at Binance. After a price increase of 23%, a correction from 3% to 4% is relatively small, compared to historical corrections after a major rally.
A withdrawal of Bitcoin was forced to happen, as the futures financing rate exceeded 0.1% on December 18 on the major stock exchanges.
The Bitcoin futures market uses a system called “financing” to find balance in the market. If there are several long-term contracts on the market, the financing rate becomes positive. If so, buyers or holders of long-term contracts must pay short sellers and vice versa.
On December 18, the funding rate exceeded 0.1% for Bybit and other leading scholarships, for the first time since the November rally, to $ 19,000. At that time, after the futures market was overheated, BTC recorded a significant decline to $ 16,000.
A withdrawal of 20% to 30% was likely at the time, as the funding rate remained consistently high. This time, the funding rate cooled relatively quickly. As such, the chances of consolidation and not correction are higher, especially as new retail investors remain largely on the sidelines, other data show.
A pseudonymous cryptocurrency trader has identified that the Binance Futures financing rate has exceeded the Deribit.
Although these data have no specific relevance, historical trends show that when this happens, Bitcoin tends to retreat. trader said:
“It seems that most of the time the Binance financing exceeds the Deribit financing, we get a lateral movement or a local top. It could be a “peak FOMO retail signal”.
One reason behind this trend could be the significance of Binance Futures as a way to assess 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 rates.
Binance Futures consistently remains one of the top three futures exchanges with open interest alongside CME and OKEx.
Therefore, when Binance Futures starts to show signs of an overheating impulse, the market could become cautious in the short term.
The short-term roadblock is $ 23,350
In the short term, traders identify the $ 23,350 resistance level as a key obstacle for Bitcoin.
Technical analyst Cantering Clark said that if Bitcoin exceeds $ 23,350, it is likely to follow an upward trend. He said:
“The whole structure of yesterday spent almost all its time within the value of the previous day. The previous day was balanced towards the end of the day. Looking very clean so far, good option inside the day. configuration if we remove 23350. Play the range until it changes. “