Bitcoin continues to hold firm at current spot rates, as observed from the daily chart analysis. Despite this stability, the overall trend remains bearish, with the price action confined within a breakout formation indicative of a downward trajectory. This analysis follows the significant drop on September 7, which saw Bitcoin, the world’s most valuable cryptocurrency, plunge towards the critical $50,000 mark.
Bitcoin Leveraged Positions Building Up
Technically, the bearish trend persists unless bulls can counteract the losses incurred on September 7. From an effort-versus-result standpoint, the downward trend initiated on that date is expected to influence the short-term outlook, potentially accelerating a decline below the lows seen in August.
Amid this trend, an on-chain analyst has highlighted a substantial accumulation of leveraged positions since March 2024. Although the future direction of prices remains uncertain, the current situation suggests that sellers hold the advantage. If bulls manage to gain control, it would signify a major sentiment shift, providing a boost to BTC enthusiasts who have faced significant losses over the past three months. Regardless of the direction, the buildup of leveraged positions indicates a period of heightened volatility in the near future.
As Bitcoin trends lower, market sentiment has suffered, which is reflected in the decreasing trading volume over the past two weeks. Since late August, Bitcoin has fallen from approximately $66,000, experiencing a nearly 20% drop by the lows observed last week. Concurrently, volatility has remained relatively low, reminiscent of the conditions when Bitcoin experienced a sharp upward movement from late February, culminating in new all-time highs in mid-March 2024.
Average Funding Rate Is Bullish, Will This Change?
Interestingly, despite the lower lows, trading data reveals that the average funding rate across derivatives exchanges has remained bullish for over a year. This phenomenon could be attributed to the shift in price action that started in late Q3 2023, when Bitcoin began its recovery. The cryptocurrency managed to rebound from its weakness and surged past $70,000, recovering from the steep losses of 2022 that had dragged its value down to $15,800.
For bulls to regain dominance in the derivatives market, Bitcoin prices need to recover steadily. A breakthrough above $66,000 and the highs of July could potentially spur demand, pushing the coin past the multi-month resistance level at $72,000. However, for this scenario to materialize, there must be significant inflows into spot Bitcoin ETFs. The recent price declines have led to accelerated outflows from these products, suggesting that institutions are adopting a cautious stance. According to SosoValue, spot Bitcoin ETF issuers in the United States have seen outflows exceeding $169 million.
