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Overheated rally? 3 warning signs emerge for Bitcoin as funding rate soars

Bitcoin is rallying as buyers in the U.S. continue to drive the price up, but signs of overheating are emerging in Asia.

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Bitcoin (BTC) is continuing to rise to new heights above $35,000 on Wednesday as U.S. buyers on Coinbase further drive up the price. But the BTC futures market’s funding rate is also surging alongside futures open interest.

The combination of a high funding rate, whales in Asia selling and a record-high futures market open interest raises the chances of a short-term correction.

BTC/USDT daily candles chart (Binance). Source: TradingView.com

What’s more likely, a correction or a continuation of the Bitcoin rally?

Currently, as Mechanism Capital’s Andrew Kang noted, the aggregated open interest of the Bitcoin futures market is at a new record high. He said:

“Aggregated Open Interest for BTC Futures/Swaps has risen to $11B. Traders are currently paying >$5B in annualized interest for the privilege of longing the corn.”

The problem is that the market is overleveraged and overwhelmingly longing Bitcoin. The term longing means buying BTC with borrowed capital in the derivatives market.

The funding rate of Bitcoin in the futures market has exceeded 0.15%. On average, the BTC funding rate hovers at around 0.01%, so it is about 15 times higher than the normal rate.

Funding is a mechanism that futures exchanges use to find balance in the market. Every eight hours, long or short contract holders have to pay a fee to one another. Longs pay shorts if the market is majority long, and vice versa.

If the funding fee is above 0.15%, it means that the market is extremely overheated and the vast majority of the market is longing Bitcoin.

This trend raises the probability of a long squeeze, wherein long contract holders are forced to adjust their positions if the price of Bitcoin declines.

If the open interest of the market is at an all-time high, the chances of a larger long squeeze further increase.

Whales in the Asian market have also been selling large amounts of Bitcoin in the past week. Data from CryptoQuant shows massive inflows of BTC into Bithumb, South Korea’s biggest exchange.

Nevertheless, many positive bullish factors remain, including the hash rate. The Bitcoin hash rate is rising toward new all-time highs, according to analysts at IntoTheBlock. They said:

“Bitcoin is continuing to set new highs, breaking above $35,700 for the first time ever on Jan 5. $BTC is now up 74.9% since breaking the previous ATH on December 16. As the price continues to go up, the Hash Rate is also pushing towards new records.”

Watch Coinbase outflows

In the near term, outflows from Coinbase are the most important metric to watch to gauge the short-term sentiment around Bitcoin.

Coinbase Pro outflows. Source: CryptoQuant

Coinbase outflows often signal institutional buy orders, as institutions and high-net-worth investors prefer to store their assets away from centralized platforms. Ki Young Ju, CEO of CryptoQuant, said:

“FYI, Coinbase outflow on Jan 2 was an all-time high. It seems institutions bought $BTC when the price above 30k. $BTC bull market isn’t over.”

If the Coinbase outflows and premium remain high, the probability of a large correction should decrease in the foreseeable future.

Source: https://cointelegraph.com/news/overheated-rally-3-warning-signs-emerge-for-bitcoin-as-funding-rate-soars

Blockchain

Millenials Prefer Bitcoin Over Gold, But it it Still Extremely Unequal, Study Finds

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A recent study revealed that Bitcoin and the rest of the cryptocurrencies no longer have the bad reputation that haunted them in the past. In fact, it seems that as the years go by, the preference towards digital tokens is beginning to overtake historically favored assets such as gold and silver.

SimpleMoneyLife —a site focused on personal finance— published a research compiling information from a lot of notable sources —and providing their own insights and findings too. The results are interesting and show that there is still a lot to work on even though the ecosystem has grown a lot.

The research cited a study by deVere Group revealing that 67% of millennials believe Bitcoin is a superior safe-haven asset to gold. This narrative is increasingly gaining traction in the world of cryptocurrencies and traditional finance.

Cryptopotato recently reported that the CEO of Skybridge Capital named Bitcoin as a store of value comparable to gold, with the Bank of Singapore also making a case for this thesis.

Bitcoion vs Gold

SimpleMoneyLife claims that even as a scarce commodity, gold loses out to bitcoin in terms of rarity:

Unlike gold, we know exactly how much Bitcoin is currently in circulation and how much will be in 2050. Bitcoin is better at being scarce than gold.

The study also assures that the Blockchain technology market cap could exceed $40 Billion by 2025. Analysts say that this type of technology could influence how various industries currently do business and develop their activities. Some of the areas that will benefit the most from blockchain technologies are: Supply Chain Management, Secure Elections, Healthcare, Smart Contracts, Keeping Verified Records, Banking, and the Internet of Things (IoT).

Analysts also highlighted that the United States is starting to take a fresh look at blockchain technologies, adding that the country could begin investing close to $4.2 billion on blockchain solutions soon.

The Crypto Twitter community is also very active. SimpleMoneyLife explained that, on average, cryptocurrency enthusiasts send more than 70,000 tweets about Bitcoin every day. They did not share data on activity around other altcoins with a large social media presence such as Chainlink, Ethereum, XRP, Tron, or the new DeFi coins.

The Study Shows an Extremely Unequal Bitcoin Ecosystem

SimpleMoneyLife also highlighted some findings of the inequality of the Bitcoin ecosystem. As much as algorithmically Bitcoin has no preferences, socially, it does.

First, the Bitcoin ecosystem is male-dominated. The compilation notes that UBS says 85.77% of Males are Engaged in the Bitcoin Community Compared to 14.23% of Females.

Want to rdig deeper into the stereotypes? Bitcoin appears to be 80% dominated by white males. Hispanics and black respondents follow with 66% and 61%,  of the rest respectively.

In terms of mining, China controls 65% of the network’s total power. Simultaneously, the rest is distributed around the world, with the United States far behind in first place with a mere 7.24% of mining power.

And in terms of wealth distribution, Bitcoin is extremely unequal, with just 2% of wallets controlling more than 95% of total Bitcoin wealth and the next 100 wallets dominating 13% of the remaining total.

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Source: https://cryptopotato.com/millenials-prefer-bitcoin-over-gold-study-simplemoneylife/

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Blockchain

TA: Ethereum Trims Gains, Why ETH Could Find Strong Support Near $1,275

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Ethereum started a downside correction after trading to a new all-time high at $1,480 against the US Dollar. ETH price is currently approaching the $1,300 and $1,275 support levels.

  • Ethereum started a fresh downside correction from the $1,480 resistance zone.
  • The price is down around 10%, and it is trading close to the 100 hourly simple moving average.
  • There was a break below a major bullish trend line with support near $1,385 on the hourly chart of ETH/USD (data feed via Kraken).
  • The pair is likely to find a strong buying interest near the $1,275 and $1,280 support levels.

Ethereum Price is Approaching a Major Support

After a strong increase above $1,400, Ethereum failed to test the $1,500 resistance zone. A new all-time high was formed near $1,480 before the price started a fresh decline.

There was a clear break below the $1,400 and $1,380 support levels. More importantly, there was a break below a major bullish trend line with support near $1,385 on the hourly chart of ETH/USD. The pair broke the $1,350 support level to move into a short-term bearish zone.

A low is formed near $1,292 and ether is currently attempting a fresh increase. It broke the 23.6% Fib retracement level of the recent decline from the $1,478 swing high to $1,292 low.

Ethereum Price

Source: ETHUSD on TradingView.com

On the upside, there is a major resistance forming near the $1,365 level. It is close to the 50% Fib retracement level of the recent decline from the $1,478 swing high to $1,292 low. There is also a connecting bearish trend line forming with resistance near $1,385.

Ether price is approaching a couple of important supports near $1,300 and $1,285. The main support is forming near the $1,275 level, below which there is a risk of a larger decline in the coming sessions.

Dips Supported in ETH?

Ethereum is currently down around 10%, and it is trading close to the 100 hourly simple moving average. To start a fresh increase, it must gain bullish momentum above the $1,365 and $1,385 resistance levels.

A successful close above the trend line resistance and $1,385 could set the pace for a fresh increase. The next major resistance is near the $1,450 and $1,480 levels.

Technical Indicators

Hourly MACDThe MACD for ETH/USD is slowly losing pace in the bearish zone.

Hourly RSIThe RSI for ETH/USD is currently well below the 50 level.

Major Support Level – $1,275

Major Resistance Level – $1,380

Source: https://www.newsbtc.com/analysis/eth/ethereum-eth-could-find-strong-support-near-1275/

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Blockchain

Kraken Daily Market Report for January 25 2021

Republished by Plato

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Overview


  • Total spot trading volume at $1.6 billion, close to the 30-day average of $1.65 billion.
  • Total futures notional at $612.2 million.
  • The top 5 traded coins were, respectively, Bitcoin, Ethereum, Tether, Polkadot, and Chainlink.
  • While most coins were down, strong returns from Keep (+9.0%) and Icon (+7.2%).

January 25, 2021 
 $1603.8M traded across all markets today
 Crypto, EUR, USD, JPY, CAD, GBP, CHF, AUD 
XBT 
$32302. 
↑0.07% 
$653.4M
ETH 
$1320.8 
↓5.2% 
$642.8M
USDT 
$1.0000 
↓0.1% 
$149.4M
DOT 
$17.241 
↓4.2% 
$54.6M
LINK 
$23.501 
↓5.4% 
$38.6M
USDC 
$0.9999 
↑0.0% 
$27.8M
ADA 
$0.3436 
↓3.0% 
$21.2M
LTC 
$137.24 
↓2.7% 
$17.4M
XRP 
$0.2678 
↓2.1% 
$14.4M
UNI 
$11.352 
↓5.6% 
$10.4M
BCH 
$433.22 
↓1.5% 
$9.21M
AAVE 
$249.26 
↓6.7% 
$8.07M
XTZ 
$2.9227 
↓4.0% 
$5.88M
XLM 
$0.2614 
↓3.7% 
$5.26M
SNX 
$15.519 
↓12% 
$4.88M
ALGO 
$0.5579 
↓0.9% 
$4.48M
XMR 
$137.44 
↓0.5% 
$4.18M
CRV 
$2.0099 
↓11% 
$3.4M
ICX 
$0.8134 
↑7.2% 
$3.17M
TRX 
$0.0295 
↓1.6% 
$3.07M
YFI 
$29369. 
↓8.9% 
$2.95M
DAI 
$1.0001 
↓0.18% 
$2.9M
GRT 
$0.5304 
↓4.5% 
$2.85M
FIL 
$22.429 
↓1.2% 
$2.51M
ZEC 
$88.030 
↓2.3% 
$2.32M
KSM 
$99.319 
↓4.5% 
$2.24M
COMP 
$213.27 
↓15% 
$2.2M
ATOM 
$7.7592 
↓6.0% 
$2.11M
EOS 
$2.6516 
↓2.4% 
$2.03M
WAVES 
$6.7022 
↓4.3% 
$1.72M
NANO 
$3.1847 
↓5.7% 
$1.65M
BAT 
$0.3018 
↓5.4% 
$1.6M
OMG 
$3.5432 
↓1.3% 
$1.54M
DASH 
$105.09 
↓1.1% 
$1.54M
KAVA 
$2.3747 
↓8.2% 
$1.39M
KEEP 
$0.3268 
↑9.0% 
$1.28M
QTUM 
$3.2947 
↓7.4% 
$1.26M
OXT 
$0.2944 
↓0.27% 
$1.21M
MANA 
$0.1633 
↓4.9% 
$999K
ETC 
$7.4950 
↓2.1% 
$810K
XDG 
$0.0083 
↓4.3% 
$647K
SC 
$0.0045 
↓3.1% 
$527K
KNC 
$1.3233 
↓4.4% 
$516K
MLN 
$38.473 
↓3.3% 
$463K
GNO 
$115.57 
↓4.3% 
$450K
BAL 
$21.029 
↓8.8% 
$405K
LSK 
$1.3277 
↓2.2% 
$306K
PAXG 
$1863.2 
↓0.16% 
$284K
REP 
$20.570 
↓4.0% 
$247K
ANT 
$3.8759 
↓9.7% 
$231K
STORJ 
$0.3888 
↓5.5% 
$117K
REPV2 
$19.286 
↓2.4% 
$48.1K
TBTC 
$34102. 
↑1.9% 
$46.9K



#####################. Trading Volume by Asset. ##########################################

Trading Volume by Asset


The figures below break down the trading volume of the largest, mid-size, and smallest assets. Cryptos are in purple, fiats are in blue. For each asset, the chart contains the daily trading volume in USD, and the percentage of the total trading volume. The percentages for fiats and cryptos are treated separately, so that they both add up to 100%.

Figure 1: Largest trading assets: trading volume (measured in USD) and its percentage of the total trading volume (January 25 2021)



Figure 2: Mid-size trading assets: (measured in USD) (January 25 2021)



Figure 3: Smallest trading assets: (measured in USD) (January 25 2021)



#####################. Spread %. ##########################################

Spread %


Spread percentage is the width of the bid/ask spread divided by the bid/ask midpoint. The values are generated by taking the median spread percentage over each minute, then the average of the medians over the day.

Figure 4: Average spread % by pair (January 25 2021)



.


#########. Returns and Volume ############################################

Returns and Volume


Figure 5: Returns of the four highest volume pairs (January 25 2021)


Figure 6: Volume of the major currencies and an average line that fits the data to a sinusoidal curve to show the daily volume highs and lows (January 25 2021)



###########. Daily Returns. #################################################

Daily Returns %


Figure 7: Returns over USD and XBT. Relative volume and return size is indicated by the size of the font. (January 25 2021)



###########. Disclaimer #################################################

The values generated in this report are from public market data distributed from Kraken WebSockets api. The total volumes and returns are calculated over the reporting day using UTC time.

Source: https://blog.kraken.com/post/7576/kraken-daily-market-report-for-january-25-2021/

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