Bitcoin (BTC) Price Correction Might Extend as Key On-Chain Metrics Witness a Decrease

Recent declines in Bitcoin's price have been followed by negative sentiment across several on-chain metrics that are crucial in determining its next trajectory.

Recent Bitcoin price declines have been accompanied by several crucial on-chain metrics indicating a shift in market sentiment. ShayanBTC, an on-chain expert at CryptoQuant, highlights a drastic decrease in Bitcoin funding rates over the past few days.

Rising funding rates, typically an indicator of strong demand in the futures market, are often crucial for sustaining any market price surge. However, a sharp drop in funding rates suggests a decrease in bullish leverage in the derivatives market, which could be a response to traders exercising caution following the recent price surge.

In the absence of this buildup, upward trends may struggle to gain momentum. While this increase doesn’t necessarily have to occur immediately, its absence during a rally raises concerns about the strength of the market.

According to the expert’s analysis, as the recent Bitcoin rally progressed, funding rates surged in the middle, indicating a delayed entry of demand. However, funding rates crashed drastically as BTC faced a strong rejection at the $108,000 resistance.

This decrease in funding rates suggests a decline in traders’ commitment to the derivatives market or capital inflows, which could indicate a lack of bullish momentum as there isn’t enough support to keep BTC’s upward trajectory going.

Moreover, the current state of funding rates reflects the broader market sentiment, especially after the rejection at the $108,000 price level. If Bitcoin fails to hold above the $90,000 mark, the expert outlines two potential scenarios that could unfold in the coming days.

One outcome could be an increase in selling pressure as investors’ confidence drops, leading to deeper corrections, potentially testing lower Fibonacci levels and psychological supports.

On the other hand, if funding rates rise along with strong buying activity, Bitcoin could stabilize and begin to rally once again, with a resurgence in this metric indicating a return of bullish sentiment among market participants.

Another metric that has declined amidst the waning price performance is the Bitcoin on-chain trader realized price and profit/loss margin. Data from CryptoQuant head of research Julio Moreno shows that traders’ unrealized profit margins on-chain have dropped significantly as BTC faces corrections.

However, Moreno notes that this drop is healthy after a strong rally that pushed BTC above the $100,000 mark. Meanwhile, traders’ realized price, which acts as a support in bull markets, is at $88,000, compared to a price of $93,000.