Market Intelligence 9

Market Intelligence 9
  • Low confidence in Bitcoin prices as year end approaches
  • Perpetual Futures Funding Rates have declined as derivatives traders are more cautious
  • Average Social Sentiment is at a 30d low
  • Bitcoin Whales have reduced their positions by $1.86bn in the last week


Weekly Price Action

Bitcoin Weekly Price Action

Technical Analysis

  • Price has been trading within a tight downward channel in the past week
  • It is possible that wave ii has been completed if price closes above $50'796
  • If not, wave ii could extend down to $44'579
  • Price in the long-term charts is still on track to test back $57'600 levels
Bitcoin Short Term Chart

Aftermath of Deleveraging

Derivatives products have become an increasingly relevant influence on price action as the Bitcoin market matures. After a deleveraging event, it is important to assess whether the market is:

  • Adding more leverage and 'longing the dip' creating potential for downward price action

  • Remaining cautious in response to high volatility, consolidating price

Bitcoin Futures Perpetual Funding Rates

Perpetual Funding rates are a core datapoint for assessing the market directional bias. Funding rates help peg the price of futures as closely to the spot as possible. This is done as described below:

Longs pay shorts (Green) --> Perp. Futures Price > Spot Price
Shorts pay longs (Red) --> Spot Price > Perp. Futures Price

Extreme values in funding rates tend to signal:

  • 'Peak Euphoria' when funding is positive often correlating with price tops
  • 'Very Low Confidence' when funding is negative often correlating with price bottoms

We witnessed a peak euphoria event last week prior to the December leverage flush, as positive funding rates were extremely high. High uncertainty ensued as funding rates declined significantly and even became negative for the first time since September. Presently, funding rates have picked back up, but only slightly, indicating more caution from derivatives traders, and a return to spot driven price action.

Bitcoin Futures Perpetual Funding Rate

'Perpetual Futures Open Interest' as Proportion of Market Cap

A useful tool for identifiying the transition between a derivatives led market and a spot led market structure is to look at the the proportion of 'Perpetual Futures Open Interest' within the total Market Cap.

  • High Values (> 1.3%) signal derivatives dominance
  • Low Values (< 1.1%) signal spot dominance

Ratio has returned to healthy levels last seen since the move up from 30k-60k. This confirms that a meaningful deleveraging event has occurred as the market appears to be responding with caution.

Bitcoin Perpetual Open Interest / Market Capitalization

Net Unrealized Profit / Loss (NUPL)

The NUPL is a useful tool to gauge market direction in a spot driven market. Historically, a key level in determining market direction has been the 50 % NUPL level.

In bear markets, this level provides resistance as investors are more willing to cut their positions when moderate profits are made.

In bull markets, this level provides support as investors look to add to their profitable positions.

Currently, we are testing the 50% support level for the fourth time since July. It will be important to see if this level holds as this key psychological level can potentially define whether we transition out of the current bull trend into a bearish trend.

Bitcoin Net Unrealized Profit / Loss

Weighted Social Sentiment

According to text data collected from over 1000 crypto-related social media channels (including Telegram, Reddit, Twitter and more), the average sentiment towards Bitcoin is currently at a 30-day low. The pivoting from bullish to predominantly bearish sentiment in the span of a week signals a shift in investor confidence to end the year.

Cautious sentiment has historically proven to provide fertile ground for a price recovery. Declining positive funding rates in perpetual futures markets have also indicated price bottoms in the past as observed above. Given that both average social sentiment and funding rates suggest low confidence in the market, there is reason to believe that prices have bottomed.

Bitcoin Weighted Social Sentiment

Combined Balance of Addresses holding between 100 and 10'000 Bitcoin

Bitcoin 'Whales' have also demonstrated a lack of confidence in Bitcoin as we approach the end of the year. Their combined balance has dropped by approximately $1.86bn in the last seven days.

Combined Balance of Addresses holding between 100 and 10'000 Bitcoin


  • Derivatives traders are more cautious after the deleveraging event as positive funding rates have only slighlty picked up

  • The proportion of Futures Open Interest of total market cap has declined suggesting the return of a spot driven market

  • The onset of a bearish trend could occur if the NUPL fails to test the crucial 50% level and drops further below

  • Average social sentiment is at a monthly low, suggesting low investor confidence in Bitcoin price for the end of year

  • Whales have shed a significant amount of their Bitcoin holdings, suggesting a lack of confidence in the short-term

The market as a whole currently has very low confidence in Bitcoin prices in the short-term. It will be important to monitor these levels as a sustained decline in all these metrics could suggest the forming of a bearish market.