QCP Capital analysts warned that the recent rise in perpetual futures funding rates means cryptocurrency markets could be vulnerable to unexpected downside moves as traders leverage positions in speculative bullish trends.
“Over the past two weeks, the perpetual futures funding rate on Deribit and Binance has increased. This is a sign that bearish bets are decreasing or buying pressure is increasing. This combined with the bubble in memecoins makes us wary of a move to the downside. . This happens often when markets are strong, and you may not expect it at all,” said a QCP Capital analyst.
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Futures funding rates have remained mostly positive since early October. Image: Coin Glass.
Analysts have seen the increased memecoin activity as a sign of heightened speculation, noting that market dynamics could potentially change. “There is a bit of a bubble brewing in the memecoin market as traders take advantage of the latest trends,” they added.
Despite the possibility of a short-term sell-off in an overleveraged market, analysts remain optimistic about their medium- to long-term outlook. They recommend an accumulation strategy that allows investors to gradually increase their holdings over time, even amid short-term uncertainty. “We believe the risk-off selling will be short-lived, so we expect accumulation to continue despite a short-term decline,” they explained.
US inflation report could increase market volatility
As traders navigate this volatile situation, BRN analyst Valentin Fournier noted that investors are currently hesitant and looking for clearer guidance. He emphasized that the Producer Price Index (PPI) to be released on Friday, following the US Consumer Price Index (CPI) report to be released on Thursday, is expected to inject volatility into the market. “If inflation shows signs of decreasing as expected, Bitcoin could see another rally,” Fournier said in an email to The Block.
Inflation is expected to continue to moderate in Thursday’s September CPI report, mainly due to lower energy prices. Economists expect consumer prices to rise 0.1% on a monthly basis in September, following a 0.2% rise in August, according to consensus estimates from FactSet. This would lower the overall inflation rate to 2.3% from 2.5% in August, reinforcing the U.S. Federal Reserve’s recent cycle of rate cuts.
According to The Block’s Bitcoin price page, the price of Bitcoin has fallen about 1% over the past 24 hours and was sitting at around $62,072 as of 8:10 a.m. ET. As of today, the global cryptocurrency market cap is $2.27 trillion, down 1.5% in the last 24 hours. According to CoinGecko data, the total cryptocurrency trading volume last day was $82.7 billion, with Bitcoin dominance at 54.2% and Ethereum dominance at 12.9%.
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