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CNBC Fast money trader Brian Kelly sees three potential signs of a maximum price as Bitcoin (BTC) hits $ 19,000. Both fundamental and technical factors suggest a pullback may be imminent as the rally becomes excessively extended.
Kelly cited three reasons why a short-term Bitcoin pullback could occur. The reasons were the pump of altcoins, overpriced address growth and high funding rates. On November 25 he She said on CNBC:
“I’m still a Bitcoin bull. In the long run, I’ll be a bull for the next decade. But, if I take off my long-term investor hat and put on my short-term hedge fund trader’s hat, there are a couple of things out there that I begin to see as signs of a maximum. “
The Altcoin pump is shaking things up
As Cointelegraph reported, alternative cryptocurrencies, or altcoins, such as XRP and Stellar (XLM) have skyrocketed in recent months. Their bullish trends were reminiscent of the January 2018 altcoin mania, when BTC began to retreat and altcoins recovered.
During the latest market spike, Bitcoin underwent a sharp correction as the altcoins rallied, and then the entire market collapsed in tandem over the following months.
Considering that major altcoins have risen from 50% to 100% in the past few weeks, Kelly is cautious about the growth of the altcoin market. He said:
“More than any other asset class in the world, Bitcoin is subject to FOMO more than anything else. We’re starting to see speculative coins, coins that cost less than $ 5, starting to rise 30% to 40% per day. These are the kinds of things that happen at highs in the short and medium term. “
The altcoin rally has caused serious problems in the cryptocurrency market. For example, on November 24, XRP’s price jumped nearly 50%, hitting $ 0.90 on Coinbase. Demand has increased to such an extent that it caused Coinbase to drop temporarily, which coincided with a drop in Bitcoin and Ether (ETH) prices.
Growth of the Bitcoin address overrated
Kelly has continuously used Bitcoin’s address growth metric as a way to evaluate BTC since 2017. When address growth doesn’t match BTC’s price, it could mean BTC is overpriced.
Currently, Kelly said the market is pricing in 25% address growth for Bitcoin over the next month. According to Kelly, this is a worrying sign that could mean that the market is overvaluing BTC in the short term. He said:
“When I look at address growth, the market is discounting about 25% address growth over the next 30 days. Whenever you get that big growth of an implied address, this is a sign of caution.
The funding rates for futures are high
Finally, Kelly spotted the rising funding rates of Bitcoin’s perpetual futures contracts across major exchanges.
When the funding rate rises, it means the market is dominated by long-term buyers and contract holders, increasing the likelihood of a long squeeze or pullback. He noted:
“The last is that we are starting to see retail enter this market and you are starting to see the interest rates it charges on margin go much higher.”
Counter-arguments against a local top at $ 19,000
Over the past couple of days, however, the BTC futures funding rate has stabilized after the price of Bitcoin dropped from $ 19,400 to $ 18,700.
But while the funding rate is even higher than usual, it hovers around 0.03%. For comparison, the funding rate stood at 0.18% on major exchanges at the height of the recent rally.
98% of $ BTC turns to profit: all happy! pic.twitter.com/pGpqqBh7uG
– Elias Simos (@eliasimos) November 20, 2020
The market is heating up less while many addresses are comfortably in profit. The combination of the two could allow the rally to continue in the near term.
Google Trends data also shows that the ongoing rally has lower general interest than it was three years ago, which suggests that the rally is only in its early stages. The popularity of the keyword “Bitcoin” in Google Search is only 20% of the interest recorded at the end of 2017.
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