The leading cryptocurrency, Bitcoin, fell below $50,000, falling to levels seen in February.
While this decline in Bitcoin was accompanied by altcoins, Matrixport warned that further declines may occur.
Matrixport analysts stated that the BTC funding rate turned negative after the declines.
Analysts pointed out that August is historically a month when declines occur in the markets, and said that BTC will follow the same model in 2024.
Pointing out that there is a downward trend in the market as funding rates in Bitcoin turn negative, Matrixport warned that there may be more liquidations on the horizon before the Bitcoin price recovers.
What Do Funding Rates Indicate?
Funding rates essentially represent the fees paid between long and short positions in perpetual futures contracts. They serve to ensure that the price of perpetual contracts remains close to the spot price of Bitcoin.
When more traders hold long positions (betting on a price increase), the longs pay the shorts a fee to maintain their positions. Characterized by positive funding rates, this indicates bullish sentiment and potential overindebtedness by longs.
Conversely, when more traders hold short positions (anticipating a price decline), the shorts pay a fee to the longs. This situation of negative funding rates indicates a bearish trend and potential overleverage by shorts.
Is Bitcoin at the Bottom?
While the decline in Bitcoin unnerved investors, on-chain analyst Ali Martinez announced an important support level for Bitcoin.
Stating that the next main support level in BTC is $ 47,140, the analyst said that approximately 900,000 addresses purchased 489,000 BTC at this price level in the past.
The analyst also stated that the TD Sequential indicator is providing a buy signal on the Bitcoin hourly chart, expecting a recovery to $54,000 or $56,000.
Finally, the analyst pointed out that the 30-day MVRV Rate has not been this low since the FTX collapse, that is, November 2022, and said, “This period indicated a bottom and an excellent buying opportunity.” he said and claimed that this decline also presented a buying opportunity.
*This is not investment advice.