Bitcoin may undergo further correction, warns CryptoQuant

Despite the strong recovery after falling to $61,000 over the weekend, the price of Bitcoin may be headed for another correction, as analysts at CryptoQuant point out.

In a report released this Monday (15), the Bitcoin and Ethereum trader known only as GAAH highlighted that optimistic market sentiment may be becoming excessive, based on information from the perpetual futures market.

According to the analyst, the 30-day average funding rates for Bitcoin remain high even after the recent price drop. The current level of these rates is similar to that recorded during Bitcoin’s all-time high in 2021, which today serves as the “greatest resistance of all time” for the digital currency.

“The price is in a defined channel with around 20% expansion/retracement, an ideal scenario for large players to establish large positions,” wrote GAAH.

Bitcoin Price Analysis

As the analyst explained, the last time Bitcoin funding rates were in such a significantly bearish position was in late 2022. At that time, Bitcoin’s price was just 25% of its current value. Since then, the asset has seen multiple brief corrections of around 20%, although it has not seen a funding premium like the current one.

The asset’s rapid appreciation encouraged many retail investors to start taking profits. The Spent Output Profit Ratio (SOPR) index for short-term holders reached “extreme greed” levels in March and is only now returning to a more neutral position.

“Historically, when there are large profit-taking movements by retail investors, it indicates a possible top in the market. Following the rapid drop in prices over the past two days, there has been a significant outflow of realizations by these holders.”

James Check, lead analyst at Glassnode, commented on the same indicator on Sunday. He stated that the recent drop below the 1.0 ratio is a healthy sign for bulls. Furthermore, he noted that short-term holders are disproportionately at a loss compared to long-term holders. In this sense, the market needs to weed out weaker investors before rising again.

“The SOPR metric benefits contrarians,” Check said. “Keep an eye on the 1.0 retest, it needs to break above, not meet resistance.”

At the time of writing this text, Bitcoin is costing US$63,400, with a daily devaluation of 1.5%, according to CoinGecko.