An indicator signals that Bitcoin’s price has just seen a ‚retail FOMO spike‘
On December 18, Binance Futures‘ funding rate surpassed Deribit’s: historically, such an event leads to a consolidation or pullback in Bitcoin
On the day of December 18, Binance Futures‘ Bitcoin (BTC) funding rate surpassed Deribit’s, according to data provided by CryptoQuant. Historically, this event anticipates a local high or consolidation for the cryptocurrency.
The funding rate of major crypto assets, including Bitcoin Circuit app and Ether (ETH), has increased significantly over the past 48 hours. Typically, this indicates that the futures market is heating up, making a pullback more likely.
What does the future hold for bitcoin?
Bitcoin has already experienced a relatively mild pullback and a consolidation phase following the recent rally.
In the span of two days, between December 16 and 17, the price of Bitcoin rose from $19,300 to $23,800 on Binance. Following a price spike of 23%, a correction between 3% 3 4% is relatively small compared to historical corrections after a large rise.
On December 18, the funding rate of Bitcoin futures exceeded 0.1%, increasing the likelihood of a pullback.
Bitcoin futures use a system called „funding“ to ensure balance in the market. If multiple long contracts are present, the funding rate becomes positive. In that case, buyers or holders of long contracts must pay short-sellers, and vice versa.
Yesterday, the funding rate exceeded 0.1% on Bybit and other major exchanges for the first time since the November rally ended at $19,000. At that time, after the futures market overheated, BTC experienced a strong pullback to $16,000.
On that occasion, a contraction of 20%-30% was likely as the funding rate remained consistently high. This time around, the funding rate declined rather quickly, so the scenario favors a consolidation instead of a correction, especially given that new retail investors still largely remain on the sidelines, as other data shows.
On Twitter, a pseudonymous cryptocurrency trader reported that Binance Futures‘ funding rate has surpassed Deribit’s. While this data does not have specific relevance, historical trends show that this event precedes a contraction in Bitcoin. The trader commented:
„It seems that most of the times when the funding rate of Binance Futures exceeds that of Deribit the price tracks a sideways movement or marks a local high. This could signal a „retail FOMO spike.“
This trend could be attributed to the importance of Binance Futures as a means of assessing general market sentiment. When the price of Bitcoin witnesses a strong movement, Binance Futures often experiences large liquidations due to its high open interest.
The platform regularly remains one of the top three futures exchanges in terms of open interest, along with CME and OKEx. So when Binance Futures begins to show signs of overheating, the market may become cautious.
Bitcoin has crossed the $23,350 hurdle.
In the short term, traders have identified the resistance level at $23,350 as the decisive hurdle for Bitcoin.
Bitcoin’s order book on exchanges displayed. Source: Cantering Clark
Technical analyst Cantering Clark explained that if Bitcoin breaks above $23,350, it is likely to resume its bullish trend:
„Yesterday’s entire structure remained almost all of its time between the previous day’s values. The one from the day before was balanced towards the end of the day. So far it looks like a good opportunity for the breakout of the daily range, I am ready to enter if we break above $23,350. Until then take advantage of the range.“