Brian Kelly, the CNBC Fast Money trader, sees three possible trading signs as Bitcoin crosses $19,000. Both fundamental and practical theories assume that a pullback could be imminent as the rally becomes overextended.
Kelly listed three explanations for Bitcoin’s short-term pulback might happen. The reasons were the pump of altcoins, overpriced address growth and high funding rates. He told CNBC on Nov.25: “I’m still a Bitcoin bull. In the long run, I’m going to be a bull for the next decade. But, if I take off the long-term investor hat and put on my short-term hedge fund trader hat, there are a couple of things out there that I’m starting to see are signs of a top.”
The Pump of Altcoins
Alternative cryptocurrencies such as XRP and Stellar (XLM) have increased steeply these last months, as stated by cointelegraph. Their patterns recall the altcoin mania of January 2018, when the BTC pullback and altcoins rallied.
At the last market peak, Bitcoin heavily corrected as altcoins rallied and then in the months that followed the whole market collapsed. In the last few weeks, Kelly is careful about a spike in Altcoin’s market, since significant altcoins have risen by 50 percent to 100 percent. He said he said: “More than any other asset class in the world, Bitcoin is subject to FOMO more than anything else. We are starting to see speculative coins, coins that are under $5, start to go up 30% to 40% a day. Those are the types of things that happen at short to medium-term tops.”
In the cryptocurrency industry, the rally in altcoins has caused great problems.
Overpriced Address Growth
Since 2017, Kelly has consistently used Bitcoin’s address growth metric for valuing BTC. If the rise in the address does not meet BTC’s price, it could signify that BTC is overpriced.
Currently, Kelly said market rates for Bitcoin would rise by 25 percent in the next month. According to Kelly, this is a worrying sign that the market will in the short-term overvaluing BTC. He said: “When I look at the address growth, the market is pricing in about 25% address growth over the next 30 days. Whenever you get that big of an address growth implied, that is a caution sign.
High Funding Rates
Finally, Kelly acknowledged the increasing funding prices of Bitcoin perpetual futures contracts around major exchanges.If the funding rate rises, it means that the market is dominated by investors and long contract holders, increasing the chances of a long squeeze or a pullback. He noted: “The last one is that we are starting to see retail come into this market and you’re starting to see the interest rates that it charges on margin going much higher.”