After reaching the $100,000 level, Bitcoin suffered a sudden price collapse on Friday resulting in an estimated price loss of 7%. During this decline, permanent asset financing rates in derivatives markets took a hit. However, traders may maintain sufficient leverage to strongly influence price fluctuations.
Bitcoin’s short-term outlook is uncertain due to increasing leverage
in X published on December 6, Blockchain analytics firm Glassnode expressed that Bitcoin’s perpetual funding rate could have significant implications for the asset’s price in the short term.
For context, perpetual funding rates are periodic payments made between traders in the perpetual futures market to ensure that the contract price matches the spot price of Bitcoin. Positive funding rates indicate that long positions are driving short positions, which is bullish while negative funding rates represent the opposite.
According to Glassnode, Bitcoin’s perpetual funding rates initially showed signs of stabilization on its weekly frame amid speculative demand. However, the asset’s rise to $100,000 on Thursday driven by increased market leverage has seen these funding rates rise by 3.6 times their weekly average.
Notably, Bitcoin’s perpetual funding rate reached a peak of 0.062, representing its highest value since April. Most importantly, Glassnode’s analytics team points out that this rate rise indicates a significant impact of the derivatives market on Bitcoin’s rise above $100,000.
However, the rapid price of Bitcoin led to a significant drop in its funding rates just above 0.024. Despite this decline, Glassnode notes that these rates are still relatively high compared to where they were earlier this week, indicating that the Bitcoin market still contains a significant level of leveraged positions.
This residual market leverage indicates a strong potential for increased price volatility. Therefore, Bitcoin price action in the coming days looks uncertain as a reversal on either side could trigger a significant level of liquidation, leading to a cascading effect.
STH’s cost basis indicates a target price of $112,000
In other news, famous analyst Ali Martinez to publish Bitcoin price prediction based on the short-term holder cost basis (STH), i.e. the average price used by those who have typically held BTC in the last 155 days. It indicates the break-even level for these investors.
According to Martinez, the behavior of STH indicates that Bitcoin price will reach a local peak or price of $112,926 based on a +1 standard deviation that adjusts the STH cost basis level upward to account for price fluctuations and behavioral trends.
At press time, Bitcoin is trading at $100,137 after its recovery from Friday’s collapse faced rejection at $102,000. At the same time, the asset trading volume decreased by 42.46% and reached $89.12 billion.