Crypto market rally stalls at the $1.2T level, but bulls are getting positioned

After gaining 11% between March 16 and March 18, the total crypto market capitalization has been battling resistance at the $1.2 trillion level. This same level was reached on August 14, 2022 and was followed by a 19.7% decline to $960 billion over the next two weeks. During the lateralization period between March 20 and March 27, Bitcoin (

Leverage demand is balanced despite the resistance at $1.2 trillion

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

In the past week, the seven-day funding rate for the majority of the leading cryptocurrencies has been neutral, indicating that no excessive buying leverage has been used to support prices. This translates to firepower for bulls, if necessary, and a significant reduction in liquidation risks.

The only exception was BNB, where short sellers paid 1.25% per week to maintain their positions. Regulatory uncertainty surrounding Binance exchange is likely behind whales’ interest in shorting BNB.

The recent rally appears sustainable from a derivative perspective and bulls are well positioned to defend against future declines. However, given that the crypto price gains may have been fueled by the Fed’s emergency action to avoid a banking crisis, the odds favor further lateral price movement.

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