A recent analysis by CryptoQuant analyst ‘Avocado Onchain’ suggests that despite the current market pessimism, Bitcoin may be poised for a comeback. The analyst examined Binance’s funding rates, which represent the cost of holding long or short positions in the futures market, and identified a pattern that could signal a potential rebound.
Historically, negative funding rates on Binance have been rare, but when they occur, they have often preceded significant price rebounds. This dynamic is thought to be linked to the behavior of retail traders, who dominate Binance’s trading volume. When these traders display heightened fear, manifested through negative funding rates, Bitcoin has tended to defy the prevailing sentiment and recover.
The analyst also noted that during past bull markets, Bitcoin’s price has rebounded after hitting negative funding rates triggered by large-scale liquidations. This pattern suggests that while the current market environment appears grim, further declines in funding rates might signal a reversal, indicating that the market has reached a point of capitulation, often a precursor to a sustained recovery.
Despite this potential for a rebound, Bitcoin continues to face challenges in its upward momentum. The asset briefly reached $100,000 earlier today following a mixed US jobs report but quickly lost ground and was unable to sustain the recovery. As of writing, BTC is trading at $98,226, reflecting a modest 1.8% gain in the past day. Interestingly, while Bitcoin’s price was higher at this time last week, today’s trading volume surpasses last week’s levels, climbing from $34 billion last Friday to over $55 billion today.
Trade Bitcoin with up to 100x leverage on Defx!
As the market navigates this uncertain period, investors and traders will be closely monitoring Bitcoin’s price action and key metrics like funding rates to gauge the potential for a sustained recovery. While the current fear in the market may be a cause for concern, history suggests that such sentiment extremes could present opportunities for those who can spot the signs of a trend reversal.
Tags: Bitcoin, Binance, funding rates, market sentiment, price rebound, retail traders, trend reversal