Bankless: Will BTC follow TradFi’s gains?

Author: Jack Inabinet Source: Bankless Translation: Shan Ouba, Golden Finance

The S&P 500 has rebounded strongly over the past few days, rising 3.7% from Thursday's low and extending its gains into this week. The cryptocurrency market may have started the week flat, but does the rebound in traditional financial markets indicate upcoming gains?

Bitcoin did not follow stocks up on Monday, but it is still up 12% from Thursday's local low and is now trying to break through the 50-day exponential moving average (EMA). This technical resistance level is exactly the level that the traditional financial index had difficulty breaking through in late April.

The correlation between Bitcoin and major indices has strengthened in recent weeks, indicating that price movements in these different asset classes will occur in the same direction. If the indices continue to rise and the correlation can hold, then the price of Bitcoin will soon begin to rise.

What could a breakout above the 50-day moving average mean?

A decisive breakout above the 50-day moving average would enable Bitcoin to break through the $65,000 resistance level that has been holding back bulls since mid-April, putting it squarely above the midpoint of the range and paving the way for another test of the range top at $72,000!

Bitcoin Perpetual Swap Contracts: Bullish or Bearish?

On Thursday, Bitcoin Perpetual Swap Contracts saw their longest and deepest period of negative funding rates (i.e., payments made by the borrower to the lender) this year, an unusual departure from recent demand for leverage. While funding rates have turned positive again, they are not as problematic for longs as they were in late March, maintaining a “healthy” level at which longs do not have to pay huge fees to maintain their positions.

Lower funding rates reduce the risk of forced liquidation based on time factors and may increase demand for long positions, however, the continued compression of funding rates throughout April and the more negative magnitude of the latest decline suggest that we may be in a period of transition to structurally lower funding rates. This transition will likely be accompanied by lower prices.

Summary

There is no doubt that the market price should rebound if we want to maintain the upward trend that has been supporting prices since the end of the 2022 bear market. However, it is important to note that before setting new all-time highs, a pullback could confirm that we have entered a different phase in the market…