Bitcoin Approaches $90K: Market Euphoria and Risks of Pullbacks Highlighted by QCP Capital
As Bitcoin (BTC) prices near the significant milestone of $90,000, a wave of euphoria has engulfed the cryptocurrency market, according to a recent analysis by QCP Capital, a trading firm based in Singapore. The firm warns that this exuberance may lead to potential price pullbacks in the near future.
QCP Capital noted in a Telegram broadcast that the breakout of BTC past key resistance levels has contributed to the current market sentiment. They stated, "With BTC's break of key resistance and its multi-month range, the market is certainly in a state of euphoria. Perpetual funding rates are very elevated, and basis yields have reached seven-month highs."
Despite maintaining a structurally bullish outlook, QCP Capital expressed caution regarding possible pullbacks, particularly due to the risk of leveraged washouts. The firm highlighted that the open interest-weighted funding rates in perpetual futures have surged to 0.056%, marking the highest level since at least March, as reported by Coinglass.
This spike in funding rates suggests that bullish long positions may be becoming overcrowded. A slight price correction could trigger a capitulation among over-leveraged bulls, leading to a rush to close their positions and potentially intensifying downward pressure on the market. Historically, leverage washouts have been a common occurrence in previous bull markets, often resulting in sudden double-digit percentage declines in prices.
An elevated funding rate indicates that perpetual futures are trading at a premium compared to the spot price. Additionally, standard futures contracts are trading at an annualized premium (basis) exceeding 15% across various exchanges, including the CME. This premium reflects the returns available from market-neutral cash and carry arbitrage strategies, which involve buying the asset in the spot market while simultaneously selling a futures contract.
According to QCP Capital, such sharp spikes in basis yields have typically not persisted for extended periods. At the time of reporting, BTC was trading at approximately $88,300, representing a remarkable nearly 30% increase over the past week, with prices peaking at $89,622 during overnight trading sessions.
The recent price surge has been fueled by the optimism following Donald Trump's victory in the U.S. election on November 5, leading traders to believe that this upward trend will continue. This optimism is evident in the reactions on social media platform X whenever potential resistance levels for BTC are discussed, further driving the bullish sentiment in the market.