Why Another Bitcoin Price Dump Is Still Likely: CryptoQuant

Bitcoin’s price may be due for another correction despite a strong recovery from its weekend dump to $61,000, according to analysts at CryptoQuant.

In a community “quicktake” posted on Monday, Bitcoin and Ethereum trader GAAH noted that the prevailing bullish market sentiment may be getting too hot based on information from the perpetual futures market.

Is Bitcoin Still Overheated?

As the analyst noted, average 30-dy funding rates remain high for Bitcoin, even after its latest price dump. Their current level mirrors that during Bitcoin’s 2021 all-time high, which today serves as the digital currency’s “greatest resistance ever.”

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

The last time Bitcoin funding rates were in an equally significant bearish position was in late 2022, when Bitcoin’s price was just 25% of what it is today. Since then, the asset has experienced multiple brief corrections of roughly 20%, though it hasn’t seen a funding premium like today.

The asset’s rapid rise has incentivized many retail investors to start taking profits. The Spent Output Profit Ratio (SOPR) for short-term holders reached levels of “extreme greed” in March, and has only now retreated towards a more neutral position.

“Historically, when there are large retail profit-taking moves, it means a potential top is in the making,” the analyst added. “After the rapid fall in prices over the last two days, there has been a significant outflow of realizations by these holders.”

How To Spot The Next Bottom

Lead Glassnode analyst James Check commented on the same metric on Sunday, claiming its latest break back below a 1.0 ratio is a healthy sign for bulls. He said short-term holders are  disproportionately at a loss compared to long-term holders, and that the market must shake out its weak hands before moving higher.

“SOPR is a metric that benefits contrarians” he advised. “Watch the retest of 1.0, it needs to break above, not find resistance.”

Bitcoin’s crash over the weekend triggered $700 million in liquidations within 24 hours. Many suspect it was sparked by escalating geopolitical tensions between Iran and Israel.