- BTC tagged a document excessive of over $111K, however the market was not overheated.
- Possibility merchants have been pricing a 15% of BTC extending to $120K by the tip of Could.
Bitcoin’s [BTC] run-up to a brand new ATH of $111.8K prolonged the crypto asset’s Q2 restoration good points to 48%.
However the document rally wasn’t accompanied by large market leverage, signalling a wholesome state of affairs for bullish continuation.
However do different indicators monitoring an overheated market paint the identical image, and what are the important thing ranges to look at?
Assessing BTC’s uptrend dangers
One of many prime indicators for gauging market leverage, Funding Fee (FR), was but to flash overheated warning indicators at press time.
The FR for BTC ranged from 3% to twenty% up to now three days. The indicator is used to tie the worth of the BTC perpetual (futures) contract to the spot market worth.
To attain the correlation, merchants pay a charge, the FR, to keep up their place.
In a bullish market, the funding is optimistic, and bulls (longs) pay brief place holders periodically, about each 8 hours. For bearish markets, the alternative applies.
Supply: CoinGlass
That mentioned, extreme market leverage (taking large loans) to guess on value is all the time flagged by a excessive FR between 50% and 100%.
This type of market froth all the time occurs in bull runs, growing liquidation dangers, a mark of an overheated bull market. The result’s a possible cool-off or pullback.
That’s what occurred after the large BTC run-up above $100K final November and December. BTC’s FR jumped above 50% and even hit 100% (orange zones).
Quite the opposite, the Could pump to $111K was totally different and marked by a wholesome market with low leverage.
So, from a Funding Charges perspective, the chance of a value reversal as a result of an overheated market remained low.
One other information that supported additional uptrend was the True MVRV, a valuation metric. At press time, the metric was valued at 1.7 and has beforehand flagged native tops in late and early 2024 when it tapped 2.
Assuming historical past repeats itself, BTC nonetheless has a slight room for growth earlier than hitting an area peak round 2 or a cycle peak (if MVRV hits 3).
Supply: CryptoQuant
However, how a lot increased can BTC climb from $111K?
Possibility merchants estimate solely a 15% likelihood of BTC reaching $120K by Could’s finish. Nevertheless, contracts concentrating on $115K and $120K have been probably the most bought within the final 24 hours.
Even calls aiming for $130K by September noticed robust bids, signaling important bullish sentiment for Q2 and Q3.
Whether or not these bets will materialize stays unsure.
Supply: Deribit
