As Bitcoin Breaks $57k, Quant Explains Why It Could See A Pullback Here

Keshav Verma

3 years ago

3 mins read

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As Bitcoin rallies past $57k, Quant explains using on-chain analysis why the cryptocurrency may see a pullback here.

Bitcoin Funding Rate And Futures Open Interest Show Rising Values

As explained by an analyst in a CryptoQuant post, some BTC indicators are showing values that have historically signaled that a correction could be coming soon.

The first metric of relevance is the Bitcoin funding rate, which is defined as the periodic payment that futures contract traders have to pay. Positive values imply most traders are bullish and long traders are paying this fee to short traders.

While negative values mean just the opposite; traders are bearish on Bitcoin and short traders have to pay long traders.

The other indicator is the futures open interest. This metric shows the total number of futures contracts that are open at the end of the trading day.

Here is a chart showing the trend in both these indictors for Bitcoin:

The funding rate and futures open interest vs the BTC price | Source: CryptoQuant

As the above graph shows, both the indicators have been observing a rise in their values recently. The quant has marked instances where similar values were seen on the chart before.

Looks like when such a trend in these metrics has been seen before, a correction has followed soon after.

Also, it seems like both the long-term holders and short-term holders are in profit right now, as the below chart highlights:

The long-term SOPR and the short-term SOPR | Source: CryptoQuant

Both long-term and short-term Investors being in such profit means they are becoming more likely to take some profits at this level.

This fact combined with the rising funding rates and futures open interest makes the Quant believe that BTC could see a pullback in the short term soon.

BTC Price

At the time of writing, Bitcoin’s price floats around $56.9k, up 14% in the last seven days. Over the past thirty days, the crypto has gained 24% value.

Here is a chart showing the trend in the price of BTC over the last five days:

Bitcoin's price shows a strong move up as the coin breaks $57k | Source: BTCUSD on TradingView

BTC has continued its climb up in the last few days as the coin now rallies above $57k. It’s unclear at the moment if the crypto can keep this momentum up, but if the funding rates and futures open interest is anything to go by, the market may be leading to a correction soon. Long term indicators, however, still remain bullish.

Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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