Bitcoin retakes $20,000 fueling speculation of bull market return

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Hav­ing bro­ken through $19,300 resis­tance at the fourth time of ask­ing, Bit­coin moved high­er dur­ing the ear­ly hours of Tues­day (UTC) to peak at $20,400.

Bull exhaus­tion sees the $20,170 lev­el pro­vid­ing sup­port in the mean­time. How­ev­er, the sig­nif­i­cant gains over the past 24 hours have renewed calls for an end to the bear mar­ket from some.

Trad­er and the host of the Wolf of all Streets Pod­cast, Scott Melk­er, remarked that today’s Bit­coin price action is high­ly unusu­al giv­en that stocks have gone the oth­er way.

What’s fur­ther per­plex­ing is that this comes at a time when major cur­ren­cies, includ­ing the EUR and GBP, are los­ing sig­nif­i­cant ground to the USD.

Although the ral­ly has brought a degree of mar­ket opti­mism, what do on-chain met­rics show?

Futures Open Interest

Open inter­est refers to the num­ber of futures con­tracts over a par­tic­u­lar peri­od. A con­tract is cre­at­ed when both a buy­er and sell­er agree to it. In gen­er­al, an increase in open inter­est and a price increase con­firm an upward trend.

The Glassnode chart below shows Futures Open Inter­est soar­ing as the Bit­coin price ral­lied overnight. How­ev­er, at this time, based on a data point of one day, it is unclear whether the pat­tern will sustain.

Bitcoin Futures Open Interest

Futures Perpetual Funding Rate

As per­pet­u­al con­tracts can be held indef­i­nite­ly, the Futures Per­pet­u­al Fund­ing Rate refers to a mech­a­nism that keeps per­pet­u­al con­tracts mar­kets tied to the spot mar­ket price.

Dur­ing peri­ods when the fund­ing rate is pos­i­tive, the price of the per­pet­u­al con­tract is high­er than the marked price. There­fore, long traders pay for short posi­tions. In con­trast, a neg­a­tive fund­ing rate shows per­pet­u­al con­tracts are priced below the marked price, and short traders pay for longs.

The chart below shows a surge in futures traders will­ing to pay a pre­mi­um for longs. Sim­i­lar to Futures Open Inter­est, the lack of data points and rel­a­tive­ly mut­ed mag­ni­tude of the move call for cau­tion in declar­ing an end of the bear market.

Bitcoin Futures Perpetual Funding Rate

Can this Bitcoin rally continue?

Analy­sis of spot mar­ket vol­ume shows a slight drop-off in vol­ume from the buy­ers com­pared to the pre­vi­ous day.

The peak hourly vol­ume was 6,000 as of press time on Sept. 27. This is sig­nif­i­cant­ly less than on Sept. 21, when hourly vol­ume hit over 25,000, and BTC peaked at $19,900.

Bitcoin volume

Based on the above, this lat­est Bit­coin ral­ly was dri­ven by deriv­a­tives traders rather than spot buyers.

How­ev­er, macro fac­tors con­tin­ue to weigh heav­i­ly across all mar­kets. And with spot buy­ers wary, the bear mar­ket is unlike­ly to end.

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