Bitcoin [BTC] extended its bearish streak, dropping to a low of $65,766 before recovering to a local high of $67,827. At press timeBitcoin traded at $67,164, down slightly by 0.09% on the daily charts, reflecting increased downside volatility.
Amid this prolonged market decline, investors, especially in the futures market, have shown a predominantly bearish bias.
Bitcoin perp futures are bearish
According to Cryptorusthe market is heavily filled with short positions. The analyst noted that BTC’s funding rate fell to a low of -0.006, indicating that shorts are paying longs.
In fact, even with the dip and recovery from $60,000, the funding rate has remained negative, indicating bearish conviction. A prolonged stay in the negative zone indicates that derivatives are not yet convinced and still expect prolonged weakness.
Source: CryptoQuant
That’s why most market participants have turned to shorting. This sentiment is also supported by the Long Short Ratio, which has remained below 1 for four days in a row.
At the time of writing, the Long/Short ratio was around 0.98, indicating that most of the market’s capital has flowed into short positions. Increased demand for short positions indicates that most traders are heavily invested in a sustained market decline.
Source: CoinGlass
However, the analyst noted that prolonged negative funding rates tend to materialize near the bottom during consolidations. This is because traders have learned a lot from the sell side.
In fact, the Taker Buy Sell Ratio fell below 1 and remained around 0.9 for four consecutive days after Bitcoin fell below $70,000.
Source: CryptoQuant
With this ratio remaining below 1, this bearish observation is validated. So bearish sentiment strongly dominates the perps market, with sellers closing their positions strongly.
However, is this a reversal signal?
In most cases, when shorts pay long to stay short, especially when BTC fluctuates, another upward move could lead to further upward movement.
However, prevailing market conditions do not indicate an immediate trend reversal. At the time of writing, the downward momentum was very strong, as evidenced by the SARMACD.
Based on this momentum indicator, the MACD remained negative while the SAR was above, indicating active bearish momentum.
Source: TradingView
So sellers remain in control, putting further pressure on an already tense market and risking the price falling even further. In the short term, BTC is unlikely to experience a trend reversal.
At best, BTC will trade sideways, with $71,000 as key resistance, especially considering that Connor’s RSI is not showing a mean-reversion signal.
On the other hand, if sellers continue to dominate the market, Bitcoin could dip below $65,000 with $62,383 as crucial support.
Final thoughts
- Bitcoin’s volatility continues as BTC hovers between $65,000 and $67,000.
- Bitcoin futures are strongly bearish as derivatives remain skeptical of a market recovery.