Bitcoin and ETH appear to be trading in the overbought territory as their funding rates have increased significantly in the past few days. Current market conditions signal a temporary short-term correction before making a higher high.

Bitcoin looks like a retracement

Bitcoin could correct soon.

Speculation about the leading cryptocurrency mounts as the first Bitcoin futures-based exchange-traded fund launches on the New York Stock Exchange today.

According to data from the on-chain analytics platform Glassnode, the total amount allocated in open Bitcoin futures contracts is escalating exponentially. More than $ 23 billion came to the market through derivatives platforms, a 5-month high.

Investors appear to be in “extreme greed” mode, hoping for a possible price breakout towards a new all-time high (ATH) of $ 90,000 when the Bitcoin futures ETF officially goes live. However, network activity suggests that BTC could fall again before a new milestone is reached.

Bitcoin futures open on all exchanges | The source: Glass knot

The daily number of new BTC addresses created on the network appears to be forming a declining divergence from price. While Bitcoin rose from $ 54,000 to nearly $ 63,000 between October 7 and October 15, the daily number of new BTC addresses fell from 504,000 to 474,000. Such market behavior shows that user adoption decreases over time. This is a bearish signal.

Network growth is considered to be one of the most accurate price predictions. Overall, the steady downward trend in the number of new addresses created on a given blockchain leads to a price drop over time.

Number of new addresses | The source: Glass knot

The real price distribution of Bitcoin shows how much BTC has recently moved at each price. Currently, only 1.66% of the supply has recently exceeded the current threshold.

While this means very little upside resistance or supply, it also shows that sales momentum is picking up. With nearly 350,000 BTC bought for around $ 56,000, this could be a solid level to hold in the event of a correction.

Real price distribution UTXO | The source: Glass knot

ETH could follow Bitcoin

Similar to Bitcoin, ETH‘s perpetual swap funding rate suggests that investors may be overconfident about future price movements.

The second largest cryptocurrency by market capitalization has had a cheap funding rate since the beginning of the month. Such market behavior proves that speculators are increasingly optimistic as long positions pay a fee for short positions.

Although ETH has not yet achieved a funding rate of 0.1% or more every 8 hours, a steady increase in this indicator can be viewed as a potential corrective warning signal.

F.Absurd rate perpetual futures contract | The source: Glass knot

The falling number of active addresses on the Ethereum network also suggests that a correction is likely to be imminent. An increase in network activity is often caused by the influx of buyers. On the other hand, retail investors are less concerned if this on-chain indicator travels downward, resulting in less volatility or price erosion.

If this trend continues, ETH could drop to $ 3,400 or even $ 3,200 before the rally resumes.

Number of active addresses | The source: Glass knot

It’s worth noting that since the introduction of the ETH 2.0 deposit agreement and the London Hardfork, over $ 30 billion in ETH has been withdrawn from circulation. Meanwhile, the supply on the stock exchange continues to decline and reached a recent 3-year low of 15 million ETH. Such network dynamics indicate a potential supply shock and will push ETH to outperform BTC in the coming months. As Bitcoin Magazine reported, a key close above $ 4,000 could push the biggest altcoin rally to a new ATH above $ 6,000 if ETH maintains its bullish momentum.

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