Bitcoin Marks One Month Of Negative Funding Rates, More Decline Incoming?


Bitcoin funding prices fell for the first time below the neutral level last month. Prior to that, funding rates had been fluctuating at and below neutral for the longest period. This new trend has continued for longer than expected as the price of the digital asset continues to suffer. In this report, we look at the state of Bitcoin funding rates as well as the implications for the continuation of the current trend.

Funding rates are below neutral

When bitcoin finance prices first fell below neutral in June, the price of the digital asset was still trading above $30K. Since then, several crashes and falls have seen the cryptocurrency lose more than $10,000 in value and continue to struggle to stay above the peak of the previous cycle.

Related reading | Cryptocurrencies from the middle of the head perform in July, the best way to face the winter?

However, despite the minor upward corrections that have been recorded since then, funding rates have refused to budge. At the time of writing, Funding Rates had spent an entire month with numbers below neutral.

Binance and Bybit are some of the most prominent platforms when it comes to calculating funding rates and the last time crypto exchanges have seen funding rates at the neutral level since bitcoin’s drop from $30,000 in mid-June. Instead, funding rates started to reflect price action and have not recovered since.

bitcoin finance rates

Funding rates remain below neutral | Source: Arcane Research

This comes despite an increase in Bitcoin open interest last week which reached a new all-time high. So the financing rates have deviated from the open interest and are now following the low rates of return that are being recorded in the market.

Will Bitcoin recover?

With the price of Bitcoin rising above $20,000 again, there was some positive sentiment back in the market. However, it is still shaky since there is not much support left at this point and the price could easily be pulled down by the bears.

This is why the decline in bitcoin funding rates remains a concern. Naturally, financing rates are expected to increase when the price of the digital asset falls as much as it has fallen. But the opposite has been the case so far, meaning there isn’t much, if any, new money entering the space.

Bitcoin price chart from TradingView.com

BTC recovers just below $21,000 | Source: BTCUSD on TradingView.com

For a noticeable recovery in the bitcoin price, a slight increase in funding rates should be observed. When sentiment rises among traders, the broader market is sure to follow.

Related reading | Bitcoin price spends four weeks at the peak of 2017 prices, so what comes next?

In addition, the inflation rate from Wednesday’s CPI report was higher than expected. While this sent bitcoin prices higher, it was short-lived. For this to continue, the market needs to see more buying momentum.

Featured image from CNBC, charts from Arcane Research and TradingView.com

Follow Best Owie on Twitter For market insights, updates, and sometimes funny tweets…





Leave a Comment

Your email address will not be published.