Bitcoin (BTC) Hits New Highs but Market Remains Balanced, Warns QCP Capital

QCP Capital reported that bitcoin (BTC) reached fresh highs, but noted that overall market volatility has remained muted.

Bitcoin (BTC) hit fresh highs on Monday, but overall market volatility has remained subdued, largely due to heavy profit-taking on long calls, a type of call option that bets on BTC price increases.

The presence of long calls allowed traders to lock in profits strategically as the asset climbed, reducing upward volatility and indicating that the market was prepared for the move.

As BTC broke through key resistance levels and exited a prolonged trading range, market sentiment appeared “euphoric,” but a closer examination revealed a steep rise in perpetual funding rates and basis yields.

Perpetual (perp) funding is the cost traders pay to hold long or short positions on futures contracts, and high perp funding can indicate an overheated market.

Currently, basis yields have reached a seven-month high, which, according to QCP researchers, indicates potential over-leveraging.

Typically, such surges in basis yields are short-lived, often followed by corrective movements due to “leveraged washouts.”

These washouts occur when traders holding high-leverage positions are forced to sell or cover their positions, creating downward pressure on prices.

While QCP’s outlook remains optimistic on bitcoin structurally, the market could see sharp declines if leveraged positions start to unwind.

Economic Events This Week Could Impact Crypto Market Outlook

QCP market strategists are also keeping a close eye on several economic developments this week that it says could affect the crypto market outlook.

Crucial events include the U.S. Consumer Price Index (CPI) data on Wednesday, the U.S. Producer Price Index (PPI) data on Thursday, and a speech from Federal Reserve Chair Jerome Powell on Friday.

These announcements, QCP adds, will likely shape traders’ views on the Federal Reserve’s anticipated 25-basis-point rate cut in December.

According to QCP, if these events indicate a less favorable economic outlook, they could dampen market enthusiasm, leading to lower trading volumes and price corrections.

However, if the data aligns with market expectations for a December rate cut, BTC may continue to receive support from traders speculating on a positive economic trajectory.

QCP anticipates a consolidation phase for BTC in the near term, with the price “chopping around” current levels.

This suggests the asset could remain range-bound until new information from macroeconomic events provides additional market direction.

Despite the surge in BTC prices, QCP expects volatility levels to moderate, especially if the week’s economic announcements meet expectations.

As the cryptocurrency market awaits these updates, QCP highlights the need for a balanced approach during this period. While elevated perp funding and basis yields could indicate a temporary over-exuberance, QCP Capital’s analysis maintains a cautiously optimistic outlook, keeping a watchful eye on key economic indicators.