A well-known analytical platform CryptoQuant has just given some interesting insights into the Bitcoin market after a substantial breakdown of the important $59K support level. In their most recent analysis, BTC/USDT perpetual futures saw around $120 million of longs liquidated on the back of this news.
Source: Image by CryptoQuant
Although this liquidation value is significant, it is nothing in comparison to the amount seen on the last support level breach of $59K. CryptoQuant argues that this smaller liquidation does not imply the real “capitulation” to occur in the futures market.
In addition, the Funding Ratio indicator, the key gauge of market mood, sometimes looks at negative funding ratios in an hourly chart. But the size of these negative values does not show the significant increase in shorting activities, which makes the market sentiment interpretation more complicated.
Source: Image by CryptoQuant
Bitcoin’s Downside: Awaiting Futures Capitulation
A large liquidation volume in the future’s market and a spike in short positions are usually necessary for a market bottom to occur. Nevertheless, due to the relatively small size of the long position liquidations and the lack of notably negative funding ratios, the analysts argue that a defined ‘capitulation’ event in the futures market has not yet happened. Hence, more downside in Bitcoin price is expected.
However, analysts do not recommend too much pessimism, mentioning on-chain cycle metrics like MVRV, which indicate the possibility for an upwards move in the larger market cycle. Thus, although caution is advisable, the current situation offers chances for the strategic investors to start accumulating Bitcoin, especially if there is a clear capitulation signal in the futures market.
Source: Image by CryptoQuant
In the presence of uncertainty, prevailing market conditions pose a sophisticated opportunity for astute investors. Focusing like a hawk on the futures market and armed with clear capitulation signals, sharp players are likely to profit from any market moves.
Even though, the breach of the $59K support level caused a lot of volatility within the Bitcoin market, the lack of clear capitulation signals indicates the strength of market participants. With time, strategic positioning and a detailed appreciation of market dynamics will certainly be crucial in understanding the changing environment of Bitcoin trading.
