Looking for a bottom? Few key metrics to observe
There are three things which will always happen.
Taxes, death and (special for crypto) desire to "buy the bottom" (or "the dip").
While we might need to skip the first two (taxes and death), the last one has to be addressed.
If we want to get into the mindset of "what is the bottom" we should probably start with "what is not the bottom".
Bottom is difficult to form when too many people are looking for it (we wrote about it back in December 2021, check here).
Bottom is when literally everyone is convinced we can only go down from here.
How can we see it on the data level?
To start with, the funding rates (that is who has to pay while playing the leveraged games, "shorters or longers"?) have to stay negative for some period of time.
Why? That is the easiest way to see how "convinced" the majority is in the "down direction".
To continue, we should see more or less neutral (or ideally still negative) rates once the market tries to recover.
Why? That would give us a confirmation (of a sort). "Majority is shorting" on the bounce - that means they believe we are in a "dead cat bounce".
What do we see then now?
The majority seems to be longing the market lately.
That is not an ideal setup (to say the least) for the bottom.
If even we see quite a few other signs, typical for the bottom (UST and Luna destruction, generally negative sentiment in the market if measured on the social data), this particular one (funding rates) isn't there just yet.
Thanks for reading!
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