Bitcoin (BTC) returned above $52,000 since markets opened in the U.S. on Thursday. As it moves between $51,000 and $52,000, traders are preparing for more volatility in the near term. 

“Markets look relatively bullish for the medium run,” Andrew Tu, an executive at quantitative trading firm Efficient Frontier, told CoinDesk. “A number of technical indicators at the shorter time frames say that things are going to temporarily top out before heading back up.”

Yet, Darius Sit, co-founder and managing director of Singapore-based QCP Capital, warned that while corporate buyers and speculators have pushed bitcoin’s price to multiple all-time highs this week, the market is also currently over-leveraged and can thus expect short-term volatility.

Data from blockchain analytics firm Glassnode shows that the average level of the “funding rate” across major exchanges offering bitcoin perpetuals (futures with no expiry) has risen sharply to 0.125%, a level that has not seen since February 2020.

Bitcoin average funding rate
Source: Glassnode

“Given how expensive it is to keep leverage long now, it would possibly see some unwinding of leverage,” Sit said.

Read more: Ether Looks Overleveraged as Cryptocurrency Hits New High Over $1,900

The funding rate of perpetuals is calculated every eight hours and represents the cost of holding long positions. When perpetuals trade at a premium to spot price, the funding rate is positive, meaning longs pay shorts. Thus a high level of funding rate is considered a sign of leverage being excessively skewed to the bullish side – markets are overbought – and often adds volatility to the market.

A similar situation has taken place on ether’s (ETH) market, after the second largest cryptocurrency by market capitalization traded as high as $1,928.06 during Asian trading hours.

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