Bitcoin Open Interest, Funding Rates Point To Growing Bullish Sentiment


Bitcoin has seen a fluctuating sentiment lately. With so many regressions and recoveries, it’s no surprise that investors find it difficult to decide which side of the fence to sit on. However, while retail investors seem unsure about the market, there has been some growth in both funding and open interest rates over the past week, which indicates that positive sentiment may be stable.

Refund rates

Over the past two weeks, bitcoin funding rates have been consistently below neutral. This coincided with times when the market was struggling, which led to a new downtrend. But with the events of the past week, there has been a noticeable recovery in funding rates.

Towards the end of last week, funding rates returned to neutral levels for the first time in a month. This followed the Bitcoin price rebound last Friday before falling again. Bitcoin funding rates have since lost their foothold in neutral territory but continued to maintain higher levels ahead of Bitcoin’s recovery on Friday.

Bitcoin financing rates

Funding rates return to neutral | Source: Arcane Research

What this shows is that there is still demand for buying and selling positions in bitcoin. This means that although it appears to be swinging in favor of the bulls due to the high levels, it is still an uncertain market. In addition, last week’s rebound to neutral levels did not change much from the current trend, as funding rates have now spent nine consecutive months at or below neutral levels.

Bitcoin open interest says ‘short squeeze’

Despite the Bitcoin price drop, open interest hasn’t gone through hard times like the rest of the market. Instead, open interest denominated in bitcoin has reached several new all-time highs this year, leading to various selling pressures in the market.

Bitcoin price chart from TradingView.com

Open interest continued to see favorable market conditions as it reached a new all-time high of 421,000 BTC last Wednesday. Even the short squeeze recorded on Friday did little to reduce open interest, which remained high at 418,000 BTC at the start of this week.

Weak market sentiment indicates that this uptrend is not likely to continue for very long. The bitcoin price drop also indicates this, as the high open interest coincided with a period of price recovery. This also means that the bears were dominating the market in the period when open interest was high. Bitcoin’s drop below $20,000 is testimony that short traders continue to control the market.

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

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