After reaching the $100,000 milestone, Bitcoin suffered a sudden price collapse on Friday, resulting in an estimated price loss of 7%. During this decline, perpetual financing rates for assets in derivatives markets fell sharply. However, investors can still retain enough leverage to strongly influence price volatility.
Bitcoin’s short-term outlook is uncertain due to increased leverage
In Post X from December 6 Blockchain analytics firm Glassnode said Bitcoin’s persistent funding rate could have a significant impact on the asset’s short-term price.
For context, perpetual funding rates are periodic payments made between investors in the perpetual futures market to ensure that the contract price is in line with Bitcoin’s spot price. Positive funding rates indicate that long positions are driving low positions, which is confident, while negative funding rates mean the opposite.
According to Glassnode, BTC perpetual funding rates initially showed signs of stabilizing on a weekly basis amid speculative demand. However, the enhance in asset values to $100,000 on Thursday due to increased market leverage resulted in funding rates rising 3.6 times from the weekly average.
Notably, Bitcoin’s perpetual funding rate peaked at 0.062, which is the highest since April. Importantly, Glassnode’s analytics team notes that this jump in rates suggests a significant impact of the derivatives market in pushing Bitcoin’s price above $100,000.
However, Bitcoin’s meteoric price has caused its funding rates to drop significantly to just above 0.024. Despite this decline, Glassnode states that these rates are still relatively high compared to earlier this week, which indicates that the Bitcoin market still contains a significant level of leveraged positions.
This residual leverage in the market indicates high potential for increased price volatility. Therefore, Bitcoin’s price movement in the coming days seems unclear as a reversal on either side could trigger a significant level of liquidation, triggering a cascading effect.
STH cost basis points to target price of $112,000
In other news, renowned analyst Ali Martinez sent Bitcoin price prediction based on the asset’s short-term holder cost (STH), i.e. the average price at which those who have typically purchased BTC over the last 155 days. This indicates a break-even point for these investors.
According to Martinez, STH’s behavior indicates that Bitcoin would hit a local high or price of $112,926 based on a +1 standard deviation, which adjusts the STH cost basis level upwards to account for price volatility and behavioral trends.
At press time, Bitcoin is trading at $100,137 after its rebound from Friday’s crash was met with a rejection of $102,000. Meanwhile, the asset’s trading volume dropped by 42.46% and is valued at $89.12 billion.
