Bitcoin’s recent price action has done tremendous damage to the bullish market structure that the cryptocurrency was able to form throughout the past couple of months, with many analysts now noting that the crypto could be poised for significantly further downside.
One top analyst is now noting that one technical indicator that spells trouble for where the benchmark cryptocurrency is going next is its funding rate on major margin trading platforms.
If BTC begins a notable near-term downtrend, it is highly likely that this will send shockwaves throughout the aggregated crypto market, leading many major altcoins that have seen some intense bullishness to post massive losses.
Bitcoin’s Funding Rate Spells Trouble for Where the Crypto is Heading Next
This past Sunday, just minutes after Bitcoin’s weekly close, the crypto rallied all the way up to highs of $10,000 before finding a significant amount of resistance that halted its uptrend and sparked a notable near-term selloff.
One byproduct of this bearishness is the fact that Bitcoin’s funding rate for long positions on major margin trading platforms is incredibly high at the moment, which is not a bullish sign.
Jacob Canfield, a top cryptocurrency analyst and trader, spoke about this in a recent tweet, telling his followers that the long-position funding rate spiking while BTC’s price is dropping is “not bullish at all.”
“Funding is actually insane right now for bitcoin. How do we drop 7% and funding spikes for longs. This…is not bullish at all.”
At the time of writing, Bitcoin’s funding rate on BitMEX is a positive 0.0404%, meaning those currently in long positions have to pay out those in short positions. This suggests that bulls are overly confident, with their positions potentially acting as fuel for a major long squeeze.
The Next Major BTC Selloff Could Send Shockwaves Throughout Altcoin Market
Throughout Bitcoin’s firm 2020 uptrend, there are countless examples of smaller cryptos that have significantly outperformed Bitcoin, which isn’t an uncommon occurrence within bullish market conditions.
When BTC enters downtrends, however, altcoins tend to significantly underperform the benchmark cryptocurrency, which is already something that is being seen today.
Currently, Ethereum, XRP, Litecoin, and Bitcoin Cash are all trading down just under 5%, while BTC is only trading down 2.5%.
Some of 2020’s best performing cryptocurrencies – including Tezos and Chainlink – have been hit hard by today’s selloff, trading down 10% and 8% respectively.
If Bitcoin continues expressing bearishness as it moves down towards its key support within the lower-$9,000 region, it is highly probable that altcoins will soon see sizeable losses that outpace that of BTC.
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