It seems that Bitcoin needs to take a pause. Yesterday the second “heavy” correction of this week took place. At the time of writing, the Bitcoin price is at $66,300, which represents a decline of 4.10 percent over the past 24 hours. Only Solana and BNB scored good returns this week with increases of 26 and 20 percent respectively.

What’s suddenly going on with Bitcoin? Why is the market’s largest coin in trouble?

93 to 168% interest on long positions?

Lucas Outumuro thinks he has the answer. In a new analysis, he shares that the funding rates are at the highest level since 2021.

“The funding rates on Binance and Bybit yesterday reached the levels of 0.06% to 0.09% that you had to pay every 8 hours to keep your positions open. Those fees translate to an annual payment of 93% to 168% to open a long position on Bitcoin. These abnormally high funding rates are an indication that the market is too optimistic,” says Outumuro.

According to the analyst, this overly bullish derivatives picture is a warning for the market. He was quickly proven right, because today Bitcoin is again quite heavily in the red.

Although we cannot yet speak of the real heavy corrections that we know from Bitcoin. A share price plunge of 20 to 30 percent is yet to come. The big question is whether this is still possible in a market dominated by ETFs.

The market is overheated

“The crypto market is showing signs of overheating. The average 90-day return for the top 20 (excluding stablecoins) on IntoTheBlock is 103 percent. The worst-performing coin in the top 20 rose “only” 28 percent,” the analyst continues.

In addition, he points to the massive amounts of debt issued via Aave v3 on Ethereum. This will already double in 2024.

About $700 million worth of Wrapped Bitcoin (WBTC) flowed into Aave this year. It seems that gambling with borrowed money is also on the rise again in the DeFi world.

Now it is hoped that the correction is short-lived and we can resume the bullish momentum soon. We will probably find out during the first days of the new trading week. After all, that is the moment when the ETFs can be released again.

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Source: https://newsbit.nl/bitcoin-koers-daalt-na-signalen-van-zware-oververhitting/



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