Gate Research Institute: BTC and ETH are experiencing fluctuations and corrections, RSI strategy captures reversal trends.

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Summary

• BTC and ETH are undergoing fluctuations and corrections, with clear differentiation in price structure and volatility; short-term momentum remains weak.
• The long-short ratio and funding rates remain moderately bullish, with limited willingness to chase long positions, and market sentiment tends to be cautious.
• The contract positions gradually rebound after deleveraging, with ETH positions showing stronger resilience than BTC, and leveraged funds have not fully exited the market.
• The scale of liquidation is moderate, with alternating release of long and short forces, and the overall market structure remains balanced, but high-leverage funds are still under pressure.
• In terms of quantitative strategies, the short-term RSI strategy has shown remarkable returns, while the Gate Quantitative Fund focuses on stable returns and risk control, continuously demonstrating long-term advantages.

Market Overview

In order to systematically present the capital behavior and trading structure changes of the current cryptocurrency market, this report approaches from five key dimensions: the price volatility of Bitcoin and Ethereum, long-short trading ratio (LSR), contract holding amount, funding rate, and market liquidation data. These five indicators cover price trends, capital sentiment, and risk status, and can comprehensively reflect the current market's trading intensity and structural characteristics. The following will sequentially analyze the latest changes of each indicator since October 14:

1. Analysis of Price Volatility of Bitcoin and Ethereum

According to CoinGecko data, from October 14 to October 27, the overall cryptocurrency market continued to exhibit a volatile pattern. After reaching a new high and breaking through 126,000 USD on October 7, BTC entered a wait-and-see consolidation phase, with trading momentum significantly waning and market structure showing divergence. Both BTC and ETH displayed a volatile rebound trend.

BTC has gradually recovered since stabilizing around $108,000 at the beginning of the month, with the short-term focus shifting above $113,000; ETH has rebounded from $3,700 to the $4,000 mark, showing relatively mild movement. Overall, both are still in a mid-term consolidation phase, with the rebound mainly driven by short-term funds, and a trend-breaking formation has not yet occurred. 【1】【2】【3】

Macroeconomic factors intertwine with on-chain bullish and bearish elements. Traditional capital continues to increase its investment in the Ethereum ecosystem, with Cathie Wood investing in the Japanese Ethereum treasury company Quantum Solutions, indicating a sustained willingness from institutions to position themselves; the total value locked in DeFi stabilizes at around $220 billion, with a more balanced funding structure.

It is worth noting that Gate Perp DEX has surpassed a cumulative trading volume of 1 billion USD, becoming a new highlight in the decentralized derivatives space with the Gate Layer second-layer network and matching engine. Overall, BTC and ETH have gradually bottomed out amid recent fluctuations; if ETH can stabilize above 4,000 USD with increasing trading volume, it is still expected to strengthen first.

Figure 1: The short-term focus of BTC has shifted above $113,000; ETH has rebounded from around $3,700 to the $4,000 mark, showing a relatively mild trend.

The overall volatility of BTC remains low, only occasionally showing brief spikes on certain trading days, indicating a stable operational rhythm of major funds and relatively clear trend expectations, with limited market willingness to chase up or sell down. In contrast, ETH's volatility is significantly more active, with multiple spikes occurring in the past two weeks, reflecting frequent entry and exit of short-term funds and greater fluctuations in market sentiment, especially sensitive in key price range intervals.

Overall, the current market volatility has not fully amplified, but the frequent warming of ETH is worth paying attention to. If this is accompanied by a simultaneous increase in trading volume, it may indicate that a new round of market conditions is brewing. It is recommended to continue observing the correlation between ETH volatility and trading volume.

Figure 2: BTC's volatility rhythm is stable, with only a few high-volatility days; ETH's volatility frequently spikes, and short-term sentiment is clearly heating up.

Recently, the cryptocurrency market remains in a phase characterized by low volatility and structural differentiation. The stability of BTC is prominent, with funds primarily on the sidelines; while the repeated rise in ETH's volatility indicates that short-term funds are beginning to test their positions. If the subsequent trading volume increases in tandem and drives volatility to continue rising, the market may usher in a new round of directional choices.

2. Analysis of Long-Short Ratio (LSR) of Bitcoin and Ethereum Trading Volume

The Long/Short Taker Size Ratio (LSR) is an indicator that measures the proportion of active long and short funds in the market. An LSR greater than 1 indicates a bullish market, with long positions dominating, while an LSR less than 1 indicates a bearish market. This indicator can reflect the strength of trading sentiment and changes in momentum.

According to Coinglass data, the long-short trading scale ratio (LSR) of BTC and ETH has remained around 1, indicating that market sentiment continues to oscillate in the sideways market, with funds not forming a clear directional consensus. [5]

The LSR of BTC briefly dipped below 0.9 in mid-October before gradually rising above 1.1, indicating that market participants have a low willingness to pursue bullish positions during the pullback phase. However, as prices stabilize and volatility converges, active buying gradually resumes, and the funding attitude shifts to a cautious bullish stance.

The LSR of ETH has relatively larger fluctuations, frequently falling below the 0.9 range, reflecting a more sensitive short-term capital sentiment; however, as the end of the month approaches, the LSR of ETH has also quickly risen to around 1.1, indicating a shift in capital structure from cautious to active, with a noticeable increase in buying power.

Overall, the current long-short ratio has rebounded after a decline in the middle of the month, indicating that the market's short-term bearish sentiment has been repaired and buying activity is gradually recovering. If LSR stabilizes above 1 in the future, accompanied by a simultaneous increase in trading volume, it is expected to become an important signal for the continuation of the market rebound.

Figure 3: The BTC long-short ratio has risen above 1, with bullish sentiment gradually recovering.

Figure 4: The ETH long-short ratio fluctuates more violently, with the funding structure at the end of the month shifting from a wait-and-see approach to a bullish stance.

3. Contract Position Amount Analysis

According to Coinglass data, in the past two weeks, the contract holdings of BTC and ETH have gradually recovered after experiencing a sharp decline earlier. The market leverage structure shows a rhythm of “de-leveraging followed by re-accumulation.” The previous sharp drop reflected the concentrated liquidation of highly leveraged long positions and a flight to safety, while the subsequent steady rebound indicates that market sentiment is gradually warming up and funds are re-entering.

The BTC position amount remains in a high range of fluctuations, with bullish funds re-adding positions after prices stabilize, reflecting that institutions and major players still maintain a cautiously bullish attitude towards the future market; the ETH position trend is relatively stable, and the speed of leveraged fund inflow is faster, which may indicate that the market's confidence in the mid-term trend is relatively solid.

Overall, the current market's leverage structure has shifted from overheating to a healthy recovery phase. Funds are flowing back in but have not yet formed a comprehensive leverage expansion. If prices continue to rise accompanied by an increase in trading volume, it may drive further growth in positions; conversely, if the market faces pressure again, it is necessary to guard against the short-term pullback risk brought about by tightened liquidity.

Figure 5: The BTC position amount remains oscillating in a high range, with bullish capital re-entering after the price stabilizes.

Figure 6: The ETH holding trend is relatively stable, with leveraged funds returning at a faster pace, which may indicate that the market's confidence in the mid-term trend is relatively solid.

4. Funding Rate

The funding rates for BTC and ETH remain overall in positive territory, with a market structure leaning bullish but at a moderate pace. The funding rate for BTC shows small fluctuations, operating steadily around 0, indicating stable leveraged long positions, with institutional and medium to long-term funding sentiment still robust.

The funding rate for ETH is relatively active, briefly turning negative multiple times during periodic pullbacks, especially occurring around the middle and end of the month, reflecting a temporary shift towards conservativeness in short-term funding, but it quickly recovered thereafter, without creating systemic pressure.

Overall, the market funding rates continue to show a mild bullish pattern, with leveraged funds not significantly exiting but the sentiment remaining calm. If the funding rates continue to rise along with an increase in trading volume, it could become a momentum signal for the continuation of the market trend; conversely, if there is a continuous turn to negative, caution should be taken regarding short-term sentiment decline and price adjustment risks.

Figure 7: BTC funding rate remains stable and positive, ETH occasionally turns negative, overall market is bullish but momentum is moderate.

5. Cryptocurrency Contract Liquidation Chart

According to data from Coinglass, although the cryptocurrency market maintained a high level of volatility in mid-October, there were frequent liquidation events in the futures market, indicating that the tug-of-war between bulls and bears continued to unfold. On October 10, the largest wave of liquidations occurred, with a total liquidation amount exceeding 18 billion USD in a single day, of which long positions accounted for as much as 16.7 billion USD, reflecting that high-leverage long positions faced concentrated liquidations during the sharp market decline. [9]

In the following two weeks, long positions continued to explode multiple times, with the daily scale often exceeding 500 million USD, indicating that the buying funds are under continued pressure during the high-level corrections. Meanwhile, on October 21 and 26, the amount of short positions that were liquidated significantly increased, indicating that short sellers exited their positions to stop losses during market rebounds, and the tension between long and short funds is being released alternately.

Overall, although the current scale of liquidations does not constitute a systemic crash, the concentration of long leverage is relatively high and the risk exposure is increasing. If the subsequent trading volume does not effectively increase or volatility intensifies, market sentiment may become cautious again, necessitating the prevention of a chain reaction in short-term funding.

Figure 8: In mid-October, the concentration of long positions blowing up increased, with short positions blowing up on October 21 and 26, as the market continued to engage in a tug-of-war between long and short forces.

In the context of current high-level consolidation and converging volatility, the overall funding behavior in the crypto market remains neutral to bullish, but multiple contracts and sentiment indicators show a weakening willingness to chase long positions and a slowdown in short-term momentum. Although LSR and the long-short ratio have returned above 1, the volume is insufficient; the funding rate remains positive but has not shown expansion, and the liquidation structure has shifted from long-short rotation to a concentration of long positions, indicating a loosening of market leverage confidence. Overall, the structure is robust, but sentiment support is weakening, and the continuity of the short-term market is limited.

In the face of the marginal convergence of leveraged funds and the differentiation of long and short sentiments, investors need to closely monitor changes in key price ranges and volatility indicators to determine whether the market will shift from high-level fluctuations to trend reversals or band repairs. Therefore, the following content will shift to an empirical assessment of the “RSI Trend Reversal Strategy,” focusing on its adaptability in identifying overbought and oversold ranges and capturing short-term reversal points under different market rhythms, as well as discussing the strategy's actual performance in enhancing risk control efficiency, reducing emotional chasing and panic selling behaviors, and optimizing entry and exit rhythms in fluctuating markets.

RSI Trend Reversal Strategy

Disclaimer: All predictions in this article are based on historical data and market trends, serving only as analytical results for reference and should not be regarded as investment advice or guarantees of future market trends. Investors should fully consider risks and make cautious decisions when engaging in related investments.

1. Strategy Overview

The RSI trend reversal strategy is a short-term trading strategy that uses the Relative Strength Index (RSI) to determine market sentiment and capture price reversal opportunities. This strategy sets the RSI oversold threshold as an entry signal and the overbought threshold as an exit basis, in order to identify the corrective momentum of the market under extreme emotions, focusing on operating in the long position (going long). Buy when the price enters the oversold zone, and close the position when reaching the take profit, stop loss, or RSI overbought conditions. The strategy combines dynamic take profit and stop loss mechanisms, helping to profit from trend rebounds or control risks when misjudgments occur, making it suitable for finding short-term trading opportunities in a volatile, counter-reversal market environment.

This backtest uses the top ten cryptocurrency projects by market capitalization (excluding stablecoins) as the subject, covering mainstream public chains and high liquidity assets. It tests the adaptability and practicality of the strategy under different currencies and market phases, verifying its feasibility and robustness in real-world deployment.

2. Core Parameter Settings

3. Strategy Logic and Operation Mechanism

Entry Conditions

• When there is no position, if RSI is below rsi_oversold, the market is considered to be in an oversold state, triggering a buy signal.

Entry Conditions:

• Overbought condition: If the RSI is above rsi_overbought, it is believed that the market may reverse, triggering a closing signal.
• Stop Loss Close: If the price falls back to the purchase price * (1 - stop_loss_percent), a forced stop loss is triggered.
• Take Profit Closing: If the price rises to the buying price * (1 + take_profit_percent), trigger the take profit closing.

Practical Example Image

• Trading signal triggered The chart below shows the SUI/USDT 1-hour candlestick chart when the strategy triggered an entry on June 15, 2025. After a continuous decline, the RSI dropped below the oversold zone around 20 early that morning and quickly rebounded above 40, indicating signs of a short-term reversal. At the same time, the MACD fast line began to approach the slow line, signaling that momentum is recovering, and there are also signs of increased trading volume. Although the price has not significantly moved away from the bottom, the RSI's rebound from oversold levels combined with low-volume support aligns with the strategy's “buy on dips” conditions, thus triggering a buy signal and positioning for the subsequent rebound.

Figure 9: SUI/USDT Strategy Entry Position Diagram (June 15, 2025)

• Trading actions and results After rebounding the previous day, the SUI price continued to oscillate upward. The RSI briefly broke through 75, entering the overbought zone, but then momentum weakened and the RSI retreated. The strategy triggered a closing operation based on the overbought condition to lock in the profits from the earlier gains. Although the price continued to rise slightly after exiting, the MACD curve indicates that momentum is slowing, and the histogram is shrinking, showing signs of weakening short-term bullish momentum; at the same time, the short-term moving averages are starting to converge, forming a typical “high momentum weakening” structure. This exit aligns with the risk control logic of “taking profits when the upward trend becomes overheated,” effectively avoiding potential subsequent pullback pressure. In the future, if dynamic profit-taking or trend-following mechanisms can be combined, it is expected to further enhance overall profit-taking efficiency and profit margins.

Figure 10: SUI/USDT Strategy Exit Position Diagram (June 16, 2025)

Through the above practical examples, we intuitively demonstrate the entry and exit logic and dynamic risk control mechanism of the RSI strategy during extreme fluctuations in market sentiment. The strategy is based on the RSI indicator to identify opportunities for oversold rebounds and overbought weaknesses, entering the market at opportune moments after the RSI falls below a specific threshold to capture rebound momentum; when the RSI rises to the overbought area or the price reaches take profit/stop loss conditions, it exits in a timely manner, thereby maximizing profits and controlling risks during short-term reversals.

Based on limited drawdowns, this strategy successfully locks in phase gains, demonstrating its ability to capture reversals and maintain trading discipline in a volatile environment. This case not only validates the executability and defensive efficiency of the RSI strategy in real market conditions but also provides an empirical basis for subsequent parameter optimization, combining multiple factor indicators, or expanding to other trading varieties.

4. Practical Application Examples

Parameter Backtesting Setting

To find the best combination of parameters, we conducted a systematic grid search over the following range:

• rsi_overbought: 60 to 95 (step size of 5)
• rsi_oversold: 5 to 30 (step size of 5)
• stop_loss_percent: 1% to 2% (step size 0.5%)
• take_profit_percent: 10% to 16% (step size of 5%)

Taking the top ten projects by market capitalization (excluding stablecoins) as an example, this article backtested the 4-hour K-line data from October 2024 to October 2025, with a total of 288 sets of parameter combinations tested, and selected the top ten sets with the best annualized return performance. Evaluation criteria include annualized return, Sharpe ratio, maximum drawdown, and ROMAD (return to maximum drawdown ratio) to comprehensively measure the strategy's stability and risk-adjusted performance in different market environments.

Figure 11: Performance Comparison Table of BTC and ETH Strategies

Strategy Logic Explanation

When the program detects that the RSI indicator falls below the preset oversold threshold, it is considered that the price has entered an extreme low emotional zone, and the strategy will immediately trigger a buy operation. This logic aims to capture entry opportunities at the early stage of market short-term reversals, using RSI to assess potential recovery points for buying momentum, and combining dynamic take-profit and stop-loss mechanisms to strengthen risk control. If the RSI subsequently rebounds to the overbought zone, or the price reaches the set take-profit or stop-loss range, the system will automatically execute an exit operation to lock in profits or avoid further losses.

Taking BTC as an example, the settings used in this strategy are as follows:

• rsi_oversold= 60 (Oversold threshold, buy when below this value)
• rsi_overbought = 30 (overbought threshold, exceeding this value triggers a position close)
• stop_loss_percent = 1.5%
• take_profit_percent = 15%

This logic combines trend breakout signals with fixed ratio risk control rules, suitable for trading environments where market direction is clear and wave structures are distinct. It effectively controls drawdowns while following trends, enhancing trading stability and overall profit quality.

Performance and Results Analysis

The backtesting period is from October 2024 to June 2025, with the strategy applying the RSI overbought and oversold logic to mainstream crypto assets, demonstrating stable overall returns. As seen in the chart, the cumulative return curves of BTC and ETH show a stepwise upward trend, with limited fluctuations during the period, indicating that the strategy possesses good defensiveness and continuous profitability in medium to long-term oscillatory markets.

As of October 2025, the cumulative returns of the BTC strategy are approximately 52%, while ETH stands at about 51%. The trends of both are roughly synchronized, with differences mainly arising from short-term reversal amplitudes and volume variations. The strategy maintains a low drawdown during the backtesting period and successfully preserves returns amidst multiple market pullbacks, resulting in an overall smooth upward return curve. Overall, the RSI strategy can maintain a stable risk-reward structure among mainstream cryptocurrencies and still achieve robust performance in an environment lacking a unidirectional trend, validating its applicability in a volatile market.

In contrast, Gate's quantitative fund focuses on neutral arbitrage and hedging strategies, further strengthening robust returns and risk control. It pursues long-term compound returns under a strict risk control system, providing investors with a more balanced and low-volatility quantitative allocation solution.

Figure 12: Comparison of Cumulative Returns of Optimal Parameter Strategies for BTC and ETH Over the Past Year

5. Summary of Trading Strategies

The RSI trend reversal strategy uses the RSI indicator as its core logic, combined with dynamic profit-taking and stop-loss mechanisms, demonstrating robust returns and good reversal capture ability across various mainstream crypto assets. Backtesting results show that the cumulative returns of the BTC and ETH strategies are approximately 50%, with a return curve exhibiting a stepped upward structure, reflecting the strategy's stable performance in volatile and neutral market conditions. The strategy effectively controlled drawdowns during the backtesting period, maintaining positive returns through multiple market fluctuations, resulting in an overall smooth and robust performance.

Although short-term reversal models have good profit potential, they may still limit gains due to early exits in a one-sided market, resulting in limited stability of returns. Therefore, in actual investment, how to achieve compound growth while controlling volatility has become a key direction for quantitative asset management.

Based on this, the Gate Quantitative Fund focuses on neutral arbitrage and hedging strategies as its core, concentrating on stable returns and risk control, providing investors with a more balanced and sustainably long-term quantitative allocation solution. To help users experience the long-term compound performance of stable quantitative strategies, Gate has launched the “Limited Time Interest Rate Increase Activity for New Quantitative Fund Investors.” During the event period (from October 27, 2025, 14:00 to November 10, 2025, 14:00, UTC+8), new users who subscribe to the quantitative fund for the first time can enjoy a 14-day average holding +5% annualized interest rate increase, with a total annualized return exceeding 19%.

The quantitative fund is operated by a top asset management team, with strategies including neutral arbitrage and hedging to control drawdowns, balancing returns and risks as core objectives, making it suitable for investors who prefer low volatility and seek long-term stable returns.

Summary

From October 14 to October 27, 2025, the cryptocurrency market continued to show a high-level consolidation pattern, with marginal weakening in funds and sentiment. Although BTC and ETH have not broken down technically, the volatility and trading volume continue to converge, indicating a slowing rhythm. LSR and funding rates remain slightly bullish but have not expanded, reflecting cautious bullish sentiment.

On the contract level, BTC positions have rebounded after a pullback, while ETH has shown a steady rise; the funding rate is moderately positive, and leveraged funds have not significantly exited the market. The liquidation wave of long positions on October 10 highlights the fragility of leverage, and market defensiveness is increasing. Overall, the market is in the final stages of a consolidation, with structural rotation and chip cleaning coexisting. Without new funds to drive prices up, caution should still be exercised regarding the risk of a pullback.

In this context, strategies based on the RSI overbought and oversold reversal logic have shown good practical potential. Backtesting results indicate that the cumulative returns for BTC and ETH are approximately 50%. The strategy can effectively control drawdowns in volatile markets, and the profit curve shows a steady upward trend. It is important to note that high Beta coins may exit too early due to continuous overbought conditions in a one-sided trend, affecting overall return performance. In the future, combining dynamic thresholds, volatility screening, and volume factors could further optimize signal quality and enhance the strategy's adaptability and stability across different periods.

In comparison, the Gate quantitative fund focuses on neutral arbitrage and hedging strategies, emphasizing stable returns and risk control, providing investors with a more balanced and long-term sustainable quantitative allocation option. The fund achieves stable compound returns under the premise of controlling drawdowns through a strict risk control system and multi-asset diversification, offering a better quantitative investment path for investors seeking stable returns in volatile markets. <br> Reference Material:

1. CoinGecko, https://www.coingecko.com/
2. Gate, https://www.gate.com/trade/BTC_USDT
3. Gate, https://www.gate.com/trade/ETH_USDT
4. Sosovalue, https://sosovalue.com/assets/etf/us-btc-spot?from=moved
5. Coinglass, https://www.coinglass.com/LongShortRatio
6. Coinglass, https://www.coinglass.com/BitcoinOpenInterest?utm_source=chatgpt.com
7. Gate, https://www.gate.com/futures_market_info/BTC_USD/capital_rate_history
8. Gate, https://www.gate.com/futures/introduction/funding-rate-history?from=USDT-M&contract=ETH_USDT
9. Coinglass, https://www.coinglass.com/pro/futures/Liquidations
10. Gate, https://www.gate.com/institution/quant-fund

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