The infamous fluctuating volatility of the crypto market continues to see different fates on a monthly basis. From traders selling their tokens at a loss to betting against the market (hoping for an uptrend), the market has seen it all. But what’s going on this time?
hold on tight
Bitcoin has been falling since hitting an all-time high of $69,000 in November 2021. Altcoins have also witnessed the overall market decline.
In fact, Ethereum fell 11.45% while Bitcoin fell 9.29%. Likewise, crypto liquidation hit 673 million just two days ago. But here’s something to look forward to according to Santiment, the analytical platform.
After the market rally, cryptocurrency exchanges saw high level short Trades come in as people fear falling back to June levels.
Traders have been betting against the market while the price has been showing some important signs of life. Reading the average funding rate supported this narrative.
The negative funding rate indicated that the perpetual prices fell below the marked price.
Source: Santiment
This rapid change in funding rates indicated a shift in sentiment from greed to fear. So this is signaling a possible sign of a bottom.
Capitalizing on this “bearish” mindset, betting against the market surge made sense for traders. Santiment added, “As long as they’re betting against the markets, there’s a higher chance of a surge.”
At least not a bad omen
Ki-Young Ju, the CEO of on-chain analytics resource CryptoQuant, also revealed how historically a low funding rate “could be a buy signal.” Consider his tweet from last year, which recounts the same finding.
In this spot-driven and up-only market, a low funding rate could be a buy signal.
It doesn’t seem like a good idea to wait for a correction when institutions are buying $BTC.
Diagram 👉 https://t.co/yzjLW3MUFD pic.twitter.com/IwolH6kz0c
— Ki Young Ju (@ki_young_ju) January 3, 2021
Needless to say, going against the crowd in a bullish environment could help one to buy cryptos at a discounted price.
In addition, the indicator of net unrealized gains and losses (NUPL) rose sharply and turned positive.
Overall, referring to the weighted average funding rate, it can be argued that the short-term holders had overloaded the network and a recovery could be at play.
In fact, at press time, both BTC and ETH are showing a small increase on CoinMarketCap, but the uptrend hasn’t been significant enough to help the cryptocurrencies surpass short-term resistance levels.
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