3 warning signs suggest the Bitcoin price rally is overextended. In fact, on Oct. 7, experts questioned the robustness of Bitcoin’s bull run as they looked for a possible reversal of Wednesday’s short squeeze.
Funding rates in the red zone
After failing to establish support at the $55,000 level, BTC/USD remained at $54,000, according to data.
Bitcoin had soared to new highs of $55,700 the day before, supported by significant purchasing pressure.
Moreover, concerns on Thursday were centred on what may wind up being an opposite move lower as financing rates shifted positive across exchanges.
Overly favourable funding rates indicate that the market expects more gains and therefore long BTC represents substantial value. A large unwinding of holdings in such circumstances might expedite and deepen a downward trend, assuming one is already underway.
The Crypto Fear & Greed Index, which measures market sentiment, touched 76/100 on the day, indicating “extreme greed”.
Preparing for profit-taking
Bitcoin confronts substantial resistance levels of $58,000, $60,000, and more on the path back to price discovery, while being less than $10,000 from all-time highs at one point.
The month of October expected to end slightly below the highs, with November perhaps returning to lower levels before the month of December smashes all previous highs.
Additionally, long-term market players, like John Bollinger, inventor of the renowned Bollinger Bands trading indicator, are already recommending an exit plan this week.
On the other hand, Bollinger bands measure an asset’s upward and downward volatility and now suggest that calmer circumstances are likely to prevail. However, volatility rises when the bands shrink.