Bitcoin (BTC) reduced some gains, dropping below $ 60,000 on March 14, the day after setting a new historical high of $ 61,950 at Binance. However, the chain data indicate that the upward trend is likely to continue in the short term.
A key metric that is signaling an optimistic short-term trend for Bitcoin is the increase in stable currency deposits on the exchanges.
While high funding rates and an overcrowded market are driving the price down, the entry of marginalized capital into the crypto market may further boost Bitcoin’s momentum.
Why Bitcoin fell after a $ 60K breach
When Bitcoin enters price discovery and hits a new record, interest in the market naturally increases.
There is a lot of liquidity in the current bull market, making it an ideal time for whales and high-net worth investors to profit from their positions.
Filbfilb, a pseudonym dealer and technical analyst, noted that the high rates of financing of the futures market and Bitcoin deposits on the exchanges were detected before the fall.
The Bitcoin futures market uses a mechanism called “financing” to encourage traders based on market balance.
For example, if there are more buyers or holders of long contracts in the Bitcoin futures market, short sellers are encouraged to sell or short. When this happens, the funding rate increases, making it expensive for traders to buy Bitcoin.
Before the fall, BTC’s future financing rate was fluctuating in the range of 0.05% to 0.1%, which is five to ten times higher than the standard 0.01% financing rate. Filbfilb explained:
“Temporary liquidation of Bitcoin after high funding, large net inflows of BTC and weekend bomb. I think people thought it was different this time.”
The high inflows of Bitcoin in the exchanges probably fueled the decline because whales usually deposit BTC in the exchanges when they intend to sell.
Therefore, the combination of selling pressure from whales and the high rate of financing for futures was the likely reason behind today’s downturn.
How the entry of stablecoin can further fuel the BTC rally
But despite the halt in the rally, inflows of stablecoin in the stock markets are rising again, according to the latest data from CryptoQuant.
In the crypto market, traders often protect their assets against stablecoins like Tether (USDT) and USDC, instead of withdrawing from bank accounts.
Exchanges typically have a processing period of three to seven days for cash deposits, and when traders wish to re-enter the cryptocurrency market, transferring money from their bank accounts back to exchanges becomes complicated.
Therefore, when stablecoins start to flow into the exchanges again – as seen by the green spikes in the chart above – this suggests that marginalized capital may be looking to return to Bitcoin.
Ki Young Ju, the CEO of CryptoQuant, wrote:
“There were a lot of incoming transactions for stablecoins to trade very often. 100-287 stablecoin deposits in each ETH block (15 seconds). I think we will see more bombs in $ BTC or $ ETH in the short term.
Over the past week, the only component that was missing during the Bitcoin rally was the steady influx of currency.
When Bitcoin rises without a noticeable increase in the steady currency inflow, the likelihood of an unsustainable bullish trend and a short-term correction increases.
If the trend of marginalized capital returning to the crypto market continues, there is a high likelihood that this will further fuel Bitcoin’s momentum, resulting in a broader recovery.