Bitcoin struggles at $56,000 level as funding rates turn negative

Metaplanet secures ¥1 billion at a 0.1% APR loan; proceeds to fund additional purchases of Bitcoin on Thursday.
Bitcoin UTXO loss (%) ratio is similar to the 2020 bull cycle.
On-chain data indicates that funding rates have turned negative, highlighting prevailing bearish sentiment and the dominance of short sellers in the market.

Bitcoin's (BTC) price is recovering from initial weekly losses after a 7% drop on Monday, trading 3.8% higher at $57,245 at the time of writing on Thursday. Meanwhile, Metaplanet secured a ¥1 billion loan at a 0.1% Annual Percentage Rate (APR) on Thursday to fund additional Bitcoin purchases. However, on-chain data shows negative funding rates, indicating prevailing bearish sentiment and the dominance of short sellers. This suggests that the broader downward trend may continue in the coming days.

Daily digest market movers: Bitcoin holds $56,000 as Metaplanet secures funds to purchase BTC

This follows Tuesday's announcement by Japanese investment and consulting firm Metaplanet, which plans to raise approximately $69.13 million for further investment in Bitcoin. On Thursday, Metaplanet secured a "¥1 billion 0.1% APR loan; proceeds to fund additional purchases of $BTC", a strategic move aimed at mitigating risks associated with Japan's significant debt and Japanese Yen volatility.
Mirroring MicroStrategy's approach, which has accumulated 226,500 BTC worth $14.3 billion since 2020 under Michael Saylor, Metaplanet's adoption of Bitcoin as a reserve asset could shift towards broader cryptocurrency adoption among companies.

*Metaplanet secures ¥1 billion 0.1% APR loan; proceeds to fund additional purchases of $BTC* pic.twitter.com/seN6YdrnLO
— Metaplanet Inc. (@Metaplanet_JP) August 8, 2024

Bitcoin's price has recently fallen from $70,000 to $49,000 and is struggling to sustain its upward momentum, primarily due to heightened selling activity in perpetual markets and a long-squeeze event.
CryptoQuant's funding rates chart is crucial for gauging futures market sentiment. It has sharply declined, indicating aggressive short selling and the liquidation of long positions. With funding rates now negative, reflecting bearish sentiment and short seller dominance, which suggest that short traders are willing to pay long traders, suggesting a bearish sentiment for Bitcoin in the market.

Bitcoin Funding Rates chart

According to CryptoQuant, the percentage of Bitcoin UTXOs in loss as of 2024 is notably high, mirroring the significant correction experienced during the 2020 bull cycle.
While the Fed's rapid and extensive quantitative easing in response to COVID-19 mitigated the 2020 crash, such immediate policy measures are less feasible now.
Nevertheless, given the extended market adjustment period, there is a strong likelihood of future liquidity support through rate cuts and quantitative easing. Despite the recent severe market downturn, it may still be premature to definitively label the market as being in a bear phase.

Bitcoin UTXOs chart

Technical analysis: BTC eyes for a relief rally before downtrend resumes

Bitcoin price broke below the ascending trendline (drawn from multiple swing lows starting July 5) on August 2, leading to a 12% decline over the following three days. However, it tested support at $49,917, bounced back with a 3.7% increase on Tuesday, and at the time of writing on Thursday, trades slightly higher by $3.8% at $57,245.

If BTC continues to rise, it could encounter resistance at the 61.8% Fibonacci retracement level of $62,066 (drawn from the swing high of $70,079 on July 29 to Monday's low of $49,101).

This level aligns with the broken trendline and the 100-day Exponential Moving Average (EMA) at around $62,887, marking it a critical reversal zone.

Failure to break above $62,066 might trigger a 19% crash, back to retest the $49,917 daily support level.

The Relative Strength Index (RSI) indicator in the daily chart is around 38, just above the oversold threshold. This indicates the possibility of a temporary relief rally before the downward trend resumes.

BTC/USDT daily chart

However, a close above the August 2 high of $65,596 would change the market structure by forming a higher high on the daily timeframe. Such a scenario might drive a 6% rise in Bitcoin's price to retest its weekly resistance at $69,648.

Cryptocurrency prices FAQs

How do new token launches or listings affect cryptocurrency prices?

Token launches like Arbitrum’s ARB airdrop and Optimism OP influence demand and adoption among market participants. Listings on crypto exchanges deepen the liquidity for an asset and add new participants to an asset’s network. This is typically bullish for a digital asset.

How do hacks affect cryptocurrency prices?

A hack is an event in which an attacker captures a large volume of the asset from a DeFi bridge or hot wallet of an exchange or any other crypto platform via exploits, bugs or other methods. The exploiter then transfers these tokens out of the exchange platforms to ultimately sell or swap the assets for other cryptocurrencies or stablecoins. Such events often involve an en masse panic triggering a sell-off in the affected assets.

How do macroeconomic releases and events affect cryptocurrency prices?

Macroeconomic events like the US Federal Reserve’s decision on interest rates influence risk assets like Bitcoin, mainly through the direct impact they have on the US Dollar. An increase in interest rate typically negatively influences Bitcoin and altcoin prices, and vice versa. If the US Dollar index declines, risk assets and associated leverage for trading gets cheaper, in turn driving crypto prices higher.

How do major crypto upgrades like halvings, hard forks affect cryptocurrency prices?

Halvings are typically considered bullish events as they slash the block reward in half for miners, constricting the supply of the asset. At consistent demand if the supply reduces, the asset’s price climbs. This has been observed in Bitcoin and Litecoin.

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