Risk Management Remains Paramount in Coming Weeks

Funding rates have turned positive for bitcoin in an early, albeit hopeful sign that market sentiment is shifting positive. As an analyst, it would be improper, and even irresponsible to suggest that this marks anything remotely close to a bottom.

The starting point for investment decisions should center on risk management…and then risk management again. Institutional investors’ actions embody this strategy as many have remained on the sidelines during recent weeks’ turmoil.

The looming uncertainty that other crypto entities will soon be in distress, only adds to the motivation to wait. As some groups must liquidate BTC and ETH, the cost basis for both will only improve.

What is arguably the worst event in crypto market history, the collapse of crypto exchange giant FTX, may become a building block for crypto firms to succeed in the future, a sizable chorus is saying.

But that event remains far off. In the interim, data will remain paramount as crypto markets wade through FTX contagion. Some data will reinforce trends but other information may counter them.

The positive funding rate reflects increased demand for long positions, indicating improved investor sentiment.

However, this trend should be viewed in the context of eight prior days of negative funding, and bears watching, as the sharp decline on Nov. 9 may represent an overshoot to the downside.

The foundation for a potential short squeeze will have been laid, if this plays out.

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