If you look at Twitter, it may appear that the crypto market is anything but bearish.Friday and Saturday were marked by extremely strong rallies in the prices of altcoins, despite consolidation in the two leading cryptocurrencies.Many small caps, medium caps, and even large-cap altcoins enjoyed gains of 10-50 percent yesterday, resulting in a sharp decline in the Bitcoin dominance to 65 percent as of this article’s writing. Earlier this week, the metric was as high as 68.5 percent.But this price action hasn’t convinced all analysts that Bitcoin, Ethereum, and the rest of the market are ready to move higher.Bitcoin is in a bear market?Qiao Wang, a crypto-asset investor formerly of Messari and Tower Research, recently postulated that Bitcoin and the crypto market may not be in a full-blown bull market as some have speculated.He shared on Jan. 15 that he thinks we may be in a “mini bear market” due to the vast amount of speculators, which is evidenced by the funding rates of crypto futures markets:
“IMO we are in a mini-bear market. Not enough conviction to short, and certainly think we’ll be a lot higher 6-12 months from now. Want to see speculators go away and spot buyers step up as invalidation. No clue yet how low we’ll go, but 20k-25k would hurt both bulls and bears.”
IMO we are in a mini-bear market. Not enough conviction to short, and certainly think we’ll be a lot higher 6-12 months from now. Want to see speculators go away and spot buyers step up as invalidation. No clue yet how low we’ll go, but 20k-25k would hurt both bulls and bears.
— Qiao Wang (@QwQiao) January 15, 2021
For some brief context, the funding rate is the reoccurring fee that long positions pay short positions to keep the price of a futures market to the price of a spot market. High funding rates often indicate that there are a large amount of leveraged buyers that are speculating on an asset appreciating in a short time frame.Wang added that there is a lot of fragilities in the market right now that leaves it vulnerable to a potential correction:
“I’m still long some high quality DeFi, which I think we’ll do very well if my BTC thesis is wrong. Either way there’s a lot of fragility in the system. Not the time to be a hero.”
His sentiment is similar to that shared by Guggeinheim’s Scott Minerd, who said in a recent interview with Bloomberg that Bitcoin is likely in the midst of a short-term “speculative frenzy” or mania.