Is $68,500 Bitcoin Recovery A Dead-Cat Bounce? What Data Suggests

Here’s
what
futures
market
data
could
suggest
about
whether
this
latest
Bitcoin
recovery
will
be
a
dead-cat
bounce
or
not.

Bitcoin
Futures
Market
Shows
No
Signs
Of
Overheating
So
Far

As
explained
by
an
analyst
in
a
CryptoQuant
Quicktake

post,
the
BTC
funding
rate
has
stabilized
around
a
relatively
low
value
recently.
The
“funding
rate”
here
refers
to
an
indicator
that
tracks
the
amount
of
periodic
fees
that
derivatives
market
traders
are
paying
each
other
right
now.

When
this
metric’s
value
is
positive,
it
means
that
the
long
contract
holders
are
paying
a
premium
to
the
short
investors
to
hold
onto
their
positions.
Such
a
trend
implies
that
the
majority
of
the
market
shares
a
bullish
sentiment.

On
the
other
hand,
a
negative
value
of
the
indicator
implies
that
short
investors
are
the
dominant
force
in
the
sector,
and
thus,
the
average
derivatives
user
is
bearish
on
the
coin.

Now,
here
is
a
chart
that
shows
the
data
for
the
Bitcoin
funding
rate,
as
well
as
its
7-day
simple
moving
average
(SMA),
over
the
past
year
or
so:

The value of the metric appears to have been positive in recent months | Source: CryptoQuant

From
the
above
graph,
it’s
clear
that
the
Bitcoin
funding
rate
has
been
mostly
at
positive
levels
for
a
while
now.
This
makes
sense,
as
the
asset
has
rallied
over
the
last
few
months,
so
investors
as
a
whole
would
be
bullish
about
it.

Historically,
though,
a
highly
positive
funding
rate
has
been
a
bearish
sign
for
the
cryptocurrency’s
price.
This
is
because
the
asset
tends
to
perform
in
the
direction

opposite
to
the
majority’s
expectation,
and
the
likelihood
of
a
contrary
move
rises
as
this
expectation
becomes
stronger.

At
high
values
of
the
indicator,
there
is
an
overwhelming
bullish
sentiment,
so
tops
for
the
coin
can
become
more
probable.
As
is
apparent
in
the
chart,
the
Bitcoin

all-time
high
(ATH)
back
in
March
was
also
set
alongside
a
large
spike
in
the
metric.

The
sentiment
had
initially
remained
at
significant
bullish
levels
in
the
consolidation
period
that
followed
this
top,
but
recently,
the
metric
has
observed
a
cooldown.

The
Bitcoin
funding
rates
are
still
positive,
but
their
scale
is
much
smaller
now.
More
specifically,
the
7-day
MA
of
the
indicator
is
currently
floating
at
just
0.45%,
which
is
notably
lesser
than
the
3%
to
4%
values
seen
in
March.

So
far,
the
metric
hasn’t
spiked
alongside
the
cryptocurrency’s
recovery
beyond
the
$68,000
level,
potentially
suggesting
that
the
sentiment
hasn’t
overheated
yet.
As
the
quant
notes:

In
previous
“dead-cat-bounce”
scenarios,
funding
rates
were
higher,
with
March
2021
seeing
a
rate
close
to
3%
before
a
correction
to
$30,000,
and
November
2021
rates
between
0.7%
and
0.8%
before
the
2022
bear
market.

BTC
Price

At
the
time
of
writing,
Bitcoin
is
trading
around
the
$68,500
mark,
up
almost
9%
over
the
past
week.

Looks like the price of the coin has seen some sharp bullish momentum over the past day | Source: BTCUSD on TradingView

Featured
image
from
Yiğit
Ali
Atasoy
on
Unsplash.com,
CryptoQuant.com,
chart
from
TradingView.com