As Bit (BTC) price approaches the $90,000 mark, a sense of excitement and optimism is spreading strongly within the community, but this also raises warnings about the possibility of future price declines, according to the latest analysis from QCP Capital, a crypto trading firm based in Singapore.
According to QCP Capital, with Bit (BTC) breaking through a key resistance level and reaching a new high in several months, the market is currently in a state of extreme excitement. The company stated:
"With the perpetual futures contract funding rate soaring and the basis yield reaching a seven-month high, we can clearly see the market's positivity."
However, they also expressed caution, emphasizing that while they remain optimistic about the long-term outlook, they will need to pay attention to any adjustments, especially in the event of a sell-off due to excessive leverage usage.
According to data from Coinglass, the perpetual futures contract funding rate has risen sharply to 0.056%, the highest level since March. This indicates that the number of Long positions is increasing rapidly, and a slight price correction could cause highly leveraged investors to close their Long positions, creating selling pressure and exacerbating the market's decline. This is a common phenomenon in rising markets, where "deleveraging" often leads to sudden and significant price drops.
The high funding rate indicates that perpetual futures contracts are currently trading at a premium compared to the spot price. There is also a significant spread in standard futures contracts, with an annual insurance fee (basis) of over 15% across all major exchanges, including CME. This insurance fee reflects the profits from a neutral market cash-and-carry* trading strategy, a trading strategy in which investors take advantage of the price difference between the spot market and the futures market without facing the risk of underlying asset price volatility.
QCP Capital stated that history shows that sudden spikes in basis yield rarely last long. Maintaining a strong price increase over an extended period may become challenging, especially when factors such as leverage and insurance fees can have a significant impact on market momentum.
As of now, Bit (BTC) is trading at $86,853, up nearly 30% in the past week, with a high of $89,941 reached. The strong growth, starting after Donald Trump's victory in the US election on November 5, has reinforced traders' belief that the uptrend will continue. This optimism is clearly reflected in the reactions on the social media platform X, where the community becomes extremely excited every time a potential resistance level of Bit (BTC) is mentioned.
However, while there are reasons to be optimistic about the current uptrend, analysts warn that the market needs to be cautious about signs of leverage inflation and high funding rates, as they can lead to significant short-term volatility.
*Cash-and-carry trading is a strategy that involves buying a financial asset and simultaneously selling a corresponding futures contract to lock in the profit.
You can view the Bit (BTC) price here.
Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do their own research before making decisions. We are not responsible for your investment decisions.
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