Unlike previous weekends in this uptrend, Bitcoin (BTC) was rather mild on Saturday night and Sunday. As of the time of writing this, BTC has found itself trading for $11,000 flat — down some 3% from year-to-date highs, but up a mere 0.2% in the past 24 hours.
With this lack of immediate bullish continuation, some analysts have begun to fear that Bitcoin may, at least for the time being, be susceptible to a rapid drawdown. This is reminiscent of when BTC hit $9,100 in late-May, which was a move that sparked concerns of a retracement.
Chances of Bitcoin Correction Building
Commentator StopAndDecrypt recently pointed out that Bitcoin has begun to strongly stray from its logarithmic growth trend, which has acted as a level of support throughout its 10 years as a liquid, tradable asset.
Interestingly, prior to the last two bull runs, BTC rallied off the growth curve, then retraced to test this key level. As of the time of writing this, Bitcoin has yet to fulfill this seeming requirement, which has historically been a sign that a long-term uptrend is on the horizon. As StopAndDecrypt points out, “there’s always a dip.” For Bitcoin to return to this growth curve, it will need to collapse to the $6,000 range — just over 40% from current levels.
This isn’t the only sign that Bitcoin may soon need to correct and down a chill pill, so to speak. As hinted in a previous Ethereum World News report, on Sunday, the Bitcoin-to-USD synthetic pair on BitMEX saw its funding rate (meaning how much holders of the contract need to pay) hit 0.2965% for every eight hours of trading. High funding rates for longs incentivize those holding their positions to sell, thus moving the price of BTC on BitMEX, which should affect the broader cryptocurrency market.
Per analyst Joe McCann, the last time the funding rate was this high was May 27th, which was pretty much where Bitcoin’s bullish trend temporarily reversed.
In fact, the astute analyst points out that after May 27th, a Doji candle (marked by long wicks, skinny body, and a similar open/close price) formed on the daily chart. Dojis, of course, often precede trend reversals, and the case seen in late-May was no different.
As you presumably remember, Bitcoin peaked around the 27th, just when the funding rate hit the 0.3%/eight hours range, and then corrected from eight days straight. During that move lower, which some cynics suggested was going to bring BTC back down to $6,000 and lower, Bitcoin fell by 17%, all the way to $7,434.
Title Image Courtesy of Andre Francois Mckenzie Via Unsplash