In the last 30 days, the price of Bitcoin (BTC) has increased by 28%, reaching 36% at the weekly maximum. Following the first cryptocurrency breakout above $12,000 since September 2019, sentiment continues to be optimistic.
Several fundamental factors point towards a prolonged uptrend in the long term. Bitcoin is in a favorable macroeconomic environment, dictated by the falling US dollar and the growing demand for gold. The first cryptocurrency has been growing steadily in parallel with the US stock market and gold and has shown a substantial increase in interest in it.
In addition, Bitcoin has strong technical factors supporting optimism on the entire cryptocurrency market. The hashrate of Bitcoin’s network blockchain is again at an all-time high, which suggests stability in the mining sector. The closing of BTC’s weekly candle above $11,900 indicates a strong upward trend after weeks of consolidation in June.
Nevertheless, on August 19th the price of Bitcoin fell from $12,486 to $11,611, showing a clear rejection in a decisive resistance zone. Last August, the price of Bitcoin briefly visited the same resistance at around $12,300 before retreating again.
Bitcoin daily price chart
Due to the sudden reversal of Bitcoin at $12,400, traders seem to be anticipating a stable consolidation phase for the coming weeks in which to calm future markets, neutralize funding rates and prepare the market for a prolonged recovery with a more solid base.
The term „funding rate“ refers to the mechanism used by Bitcoin futures exchanges to ensure balance. If the market is predominantly long, holders of long contracts must compensate holders of shorts. When the funding rates are too high, the BTC price stagnates, as opening long positions in the market is less attractive.
The short-term trend of Bitcoin
Based on the various parameters examined and the interruption of Bitcoin increase to a decisive resistance level, crypto traders believe that the asset will probably remain within the current range. Michaël van de Poppe, trader at the Amsterdam Stock Exchange and collaborator at Cointelegraph, believes that BTC could move sideways for the whole month of August, possibly continuing in September. This means that altcoins could have free field, at least in the short term:
„The general scenario is that we will stay in this range for a while, before the continuation of the bearish impulse. Overall -> altcoins (the smaller ones) continue to gain“.
A slight pullback in the short term would be a healthy reset for the Bitcoin price, especially considering the funding rates. Before the recent correction, the funding rate of Bitcoin futures contracts on BitMEX and Binance Futures was around 0.0864% and 0.1199% respectively.
The funding rate of Bitcoin futures contracts
Funding rates this high risk making Bitcoin Billionaire and other major cryptocurrencies vulnerable to potential long squeeze. Therefore, a period of stability combined with a slight pullback and a drop in funding rates could benefit Bitcoin’s long-term trend.
Considering several factors, including the reset of funding rates, the derivatives trader Cantering Clark said that the BTC trend is generally positive, but uncertainty is beginning to accumulate in the crypto market following the sudden fall of the asset. When sentiment towards Bitcoin becomes cautious after weeks of growth, it can usually be considered as an optimistic development. According to Clark:
„It’s a good thing, it’s already happening. The charts are coming in. The uncertainty is mounting. Distribution‘, price forecasts at 7k, maximum, etc. It reaches the limit, reverses the funding rate and explodes upwards again“.
Mohit Sorout, founding partner of Bitazu Capital, is also convinced that the recent pullback will calm the overheated derivatives market. In July, the futures market outperformed the spot market, as reported by BitMEX Research and CryptoCompare. The crowded futures market is now starting to calm down, which could further boost BTC’s bullish trend:
„Calm down overheated derivatives for a few days here and then take us to the promised land.“