Bitcoin Futures Traders Are Too Bullish After Pump to $16,000

Nick Chong

Last Updated: June 11, 2024 1:07 pm

2 mins read

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It’s starting to appear that Bitcoin traders are a bit too bullish for their own liking.

The leading cryptocurrency has exploded higher in the past two days, rallying from the weekly lows of $13,300 to highs near $16,000. This rally comes as the U.S. dollar has plunged lower on expectations that Joe Biden will be taking the White House in the presidential election.

Bitcoin may head higher if the U.S. dollar moves lower, but futures market data shows that the rally is quickly becoming untenable. Namely, the funding rates of futures markets have finally begun to tick higher after the spot-market-led rally.

Bitcoin could rapidly correct to the downside if longs get overleveraged and get liquidated on a move lower. In other words, a long squeeze may be building.

Dangerous Bitcoin Futures Market

Bitcoin’s rally to $16,000 was predicated on a surge of spot market volumes as investors, both retail and institutional investors, were buying Bitcoin en-masse for safekeeping.

But data shows that this is starting to change as the market tops out. One crypto-asset analyst shared the chart seen below after the move higher, noting that the Bitcoin futures market is heating up:

“Retail is starting to believe again. For the first time since August we have what is considered bearish funding. Binance L/S ratio is going up rapidly.”

The chart shows that the funding rate has started to explode higher in a potentially “bearish” sign, while the positioning of long traders and short traders on the exchange has gone up rapidly.

Chart of BTC's price action over the past few weeks with analysis by crypto trader Byzantine General (Byzgen on Twitter).
Source: BTCUSD from TradingView.com

The same trader added in a later tweet that he has noticed that OKEx traders have been making similar moves, increasing their exposure to Bitcoin longs as opposed to buying the coin on spot platforms.

Fear and Greed Thrusts Higher

Adding to the expectations of a correction, Bitcoin’s Fear and Greed Index has reached multi-year highs at 92 points.

Many see this as a sign that the market will correct as investors have become too bullish too fast.

Nick Chong

I am a writer who has been following Bitcoin for years now. My insights and interviews have been featured in leading publications in the industry such as LongHash and Decrypt. I own a small amount of Bitcoin.

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