Funding Rates Flagged Crypto Pullback Before $400M Washout: QCP

According to QCP’s latest Asia Colour analysis, digital asset markets faced a sharp sell-off, liquidating over $400 million in long positions as bitcoin fell from $118,000 to $115,000 and ether dropped from $4,500 to $4,300, according to analysis by QCP Capital.

Pre-Jackson Hole Jitters Fuel Crypto Liquidation Event

This heavy selling extends the recent drawdown, QCP analysts noted on Monday. Last week, bitcoin ( BTC) fell roughly 5% from all-time highs, accompanied by over $1 billion in liquidations within decentralized finance (DeFi) lending and significant profit-taking.

QCP Capital analysts highlighted that warning signs preceded the drop. Funding rates for bitcoin ( BTC) perpetuals had been trending lower since Friday. Deribit‘s BTC funding rate, consistently above 20% last week, turned negative by Saturday and remained negative despite a slight weekend spot price increase – a pattern similar to one seen before a drop on August 1st.

The firm suggests the overnight washout may reflect traders de-risking portfolios ahead of the Jackson Hole Economic Symposium starting Thursday. With spot crypto prices still range-bound, QCP anticipates potential further profit-taking before the event. Options flows now favour puts, signalling expectations for another potential leg down.

Despite the volatility, QCP pointed to continued institutional interest, citing Tokyo-listed Metaplanet adding 775 BTC over the weekend. Given relatively low implied volatility, QCP analysts believe a major breakout is unlikely soon. They expect sideways trading, with dips near $112,000 attracting buyers and rallies toward $120,000 facing selling pressure, at least until Fed Chair Jerome Powell speaks Friday.

Thursday’s unexpectedly high Producer Price Index (PPI) reading complicates the Fed’s policy outlook, QCP observed. Markets will scrutinize Powell’s Jackson Hole speech for clues on September policy, contrasting with last year’s easing signals amid a more contentious political backdrop.