Bitcoin Cash Spot demand stays weak for 10 days – But overheating signals emerge

Bitcoin Cash [BCH] saw an 18% surge in price over the past day. However, in a broader context, the move remains relatively small, as the asset has yet to recover after losing more than 52% over the past 90 days.

While the rally continues, leverage remains a growing concern as it largely drives the current run and could leave price vulnerable to a significant pullback. This leaves BCH at risk of a further decline despite its present bullish outlook.

BCH may be overvalued, risking a decline

The market appears heated, with longs dominating capital and liquidity in the perpetual market, while the Spot market has failed to match the demand.

The perpetual market saw a massive surge in the Funding Rate on the chart, with the reading jumping to 0.0102%, indicating that there’s been a major increase in the number of long positions in the market.

In fact, at the peak on the 21st of August, the Funding Rate hit 0.0210%, as longs kept paying the funding fee to maintain price disparity.

Interestingly, the perpetual market capital also expanded, with Open Interest surging 13% to about $567 million at the time of writing.

The perpetual market’s positive outlook isn’t concerning on its own, but the weak Spot market raises questions about whether traders have overheated the market.