Bitcoin (BTC) declined below a key trend line support and is now struggling to break above it. Until it succeeds to break past this trend line support turned resistance, we have no reason to be bullish on BTC/USD. Even the RSI tells us that this downtrend is very much intact. The price is primed for further downside here and if we take a look at the 4H chart for BTC/USD we can see that it remains below the 38.2% fib retracement level from the local high at the top of the symmetrical triangle. There was a fake move to the upside but as we expected it failed to hold its ground and the price of Bitcoin (BTC) closed the 4H candle just close to the 38.2% fib retracement level.
It got a lot of traders too excited and everyone started talking about the bulls taking control but that was nothing more than a manipulate pump to the upside to shake out the bears and trap in more bulls before the decline. This has been happening over and over again throughout this bear market but traders keep falling for it every time. Now, let us take a look at something interesting. While BTC/USD has declined around 1%, ETH/USD is up for the day and eyeing further upside. A lot of you asked me as to why that is and to understand that we will have to look at something called the “funding rate”. It is the premium that leveraged longs or shorts have to pay each other for an eight hour period. If negative, the shorts pay longs and if positive, the longs pay shorts.
If we take a look at the funding rate history for the past few days, we can see that it has been cheaper to long Ethereum (ETH) compared to Bitcoin (BTC). Considering that Bitcoin (BTC) funding rate is going to get a lot more expensive in the next eight hours, it makes more sense for the bulls to turn to Ethereum (ETH) and that is one of the major reasons we have seen this massive pump in the price of Ethereum (ETH) compared to Bitcoin (BTC). Also, if we compare the sell orders for Ethereum (ETH) and Bitcoin (BTC) we can see that a lot more people are bearish on Bitcoin (BTC) than on Ethereum (ETH). This is further confirmed by the longs vs. shorts ratio for Ethereum (ETH) compared to Bitcoin (BTC).
More than 35% traders are bearish on Bitcoin (BTC) compared to less than 18% for Ethereum (ETH). As long as the funding rate remains in favor of the bulls, we can expect further upside in Ethereum (ETH) but it is pertinent to note that this is going to end really bad for retail traders. Every time the RSI has shot past 60 for ETH/USD on the daily time frame since the beginning of the year, we have seen a sharp move to the downside follow in the days and weeks ahead. There is no reason to think this time will be any different especially when the price has run into a confluence of resistance zone having rallying too far, too fast.