After reaching the $100,000 milestone, Bitcoin suffered a sudden price crash on Friday, resulting in an estimated 7% price loss. During this decline, perpetual asset funding rates in the derivatives markets took a hit. However, it is possible that traders retain enough influence to strongly influence price volatility.
Short-term outlook for Bitcoin uncertain due to increased leverage
In one X post on December 6 blockchain analytics firm Glassnode said Bitcoin’s perpetual funding rate could have significant implications for the asset’s short-term price.
For context, perpetual funding rates are periodic payments between traders in the perpetual futures market to ensure the contract price is in line with Bitcoin’s spot price. Positive funding rates indicate that long positions are paying out shorts, which is bullish, while negative funding rates represent the opposite.
According to Glassnode, BTC perpetual funding rates initially showed signs of stabilizing on their weekly frame amid speculative demand. However, the increase in assets to $100,000 on Thursday, driven by greater market forces, caused these financing rates to rise 3.6x their weekly average.
Notably, Bitcoin’s perpetual funding rate peaked at 0.062, representing the highest value since April. Importantly, Glassnode’s analytics team notes that this price spike indicates a significant influence from the derivatives market on Bitcoin’s rise above $100,000.
However, Bitcoin’s flash price resulted in a large drop in funding rates, just above 0.024. Despite this decline, Glassnode states that these rates are still relatively high compared to earlier this week, indicating that the Bitcoin market still contains a significant level of leveraged positions.
This residual leverage in the market indicates a high potential for greater price volatility. Therefore, Bitcoin’s price movement in the coming days appears unclear as a reversal on either side could trigger a significant level of liquidation, causing a cascading effect.
STH cost basis indicates a price target of $112,000
In other news, the well-known analyst Ali Martinez has posted a Bitcoin price prediction based on the short-term holder cost basis (STH), i.e. the average price at which those who typically acquired BTC in the last 155 days. It indicates a break-even level for these investors.
According to Martinez, STH behavior indicates that Bitcoin would reach a local top price of $112,926 based on a standard deviation of +1 that adjusts the level of the STH cost basis upward to account for price volatility and behavioral trends.
At the time of writing, Bitcoin is trading at $100,137 after the recovery from Friday’s crash was rejected at $102,000. Meanwhile, the asset’s trading volume has fallen by 42.46% and is valued at $89.12 billion.