Bitcoin is something that appears to be a more standoff than a directional move, and continues to trade within a relatively tight range. Despite a drop below the “psychologically important” level, BTC prices have been objectively relatively flat for the past month, but leverage continues to park and the cost of carrying it has only increased.
This has made the market interesting. Prices remain relatively flat and cash demand is curtailed, but derivative traders are willing to pay for exposure through Perps. It is not the daily change that reflects the true state of the market, but the persistence of its will.
Permanent futures funding rates are the best indicator for the state. Permanent contracts charge longs daily for a month, with an average daily fee of nearly 1%. That level of carry is not a blip. This represents the structural costs that accumulate over time.
Maintaining this position throughout perpetual means accepting stable bleeding that makes sense only when prices are expected to rise or there is no better vehicle for exposure. Given the amount of influx seen in spot Bitcoin ETFs, it’s safe to say that the former is most likely driving the trader.
Most importantly, this stable cost of carrying does not hinder positioning. Longs continues to pay. This shows that traders are happy to sit down in a market that otherwise appears to be quite stagnant.
Data from Cryptoquant showed that the expected OI was hovering at a low $40 billion. Looking at it, the average spot sales last month were below 25,000 BTC daily. In other words, the derivatives market carries overhangs equal to spot volumes of 15 days or more.
This ratio shows how large the imbalance between system leverage and liquidity available in the cash market. If this gap is as wide as this, the potential for oversized movement is increased as derivative flows can overwhelm the slow cash side when positioned.
This does not necessarily guarantee a clearing cascade, but if enough powerful catalysts appear, set one stage.
Spot activities have been soft over the past month. Daily volume has been declining over the past week, with Taker buying and selling ratios remaining below 1. In other words, the market was net sellers. This contrasts with the futures market where Long continues to pay to keep his position open.
This juxtaposition perfectly illustrates the current state of the market. Spots are willing to make prices higher, but futures are paying for staying. Spot sales absorb rally attempts, but fundraising keeps the parp in place for a long time. Without enough powerful catalysts to break this pattern, the market will continue to drift sideways under the weight of opposition.
Liquidation offers a different angle to this imbalance. Despite the fact that prices have not moved significantly over the past month, the long liquidation has outperformed the short liquidation at around 2:1. That skew tells us that volatility tends to punish Long. The most severe stress came in late August when nearly $500 million in one day was kicked out.
The short settlement is small, with the largest day close to 500 million yen per quarter. This pattern shows that not only longs pay for funds to hold positions, but they are more exposed when the tide spins towards them.
The past week has been a little more balanced, with long liquidation only slightly higher than shorts, showing a more even distribution of risk. Still, the wider picture is one of the leverages that lean towards the longer plane, and therefore a vulnerability that leans in that direction.
Bitcoin has spent several months in holding patterns as its leverage remains intact and costs rise. That combination is unusual as high funding rates usually result in exhaustion and reduced location.
The fact that this has not happened indicates structural demand for futures exposure, whether it is due to funding, structured products, or market production operations that cannot or will not rewind. The result is a market where time itself becomes a cost. Every day is added to the Carry Bill, and at some point the bill requires enough movement to force traders out or justify the price.
For now, the standoffs continue. The next directional impulse does not come from slow drifts in spot flow or minor changes in open interest. You need a shock big enough to force a change in funding rates, a spike in cash-side demand, or a full stack clearance.
If funds become neutral or negative in several sessions, the scaffolding that stabilizes the price will weaken. If a spot taker flips the net buyer during fundraising, the bidder will ultimately match the leveraged long and the price can be expanded higher. And if neither of them occurs, the longer positive funding lasts, the more sensitive the market becomes.
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