Funding Rates Return To Neutral Following Bitcoin Relief Rally


Bitcoin funding rates had a very negative month between mid-June and mid-July. Funding rates, previously muted, quickly fell back below neutral and proceeded to spend the next month at that level. However, there is a big change as last week saw funding rates return to neutral.

Funding rate recovers when exchanges

Bitcoin funding rates were touching low points as the price of the digital asset suffered. This was worrisome given that funding rates were expected to improve as digital assets began trading primarily at what was described as “discounting.” This couldn’t be further from the truth, as funding rates fell to their lowest levels in June. He noted that circulating traders were still bearish in the cryptocurrency and held off on the move.

Related reading | Bitcoin dominance declines as Ethereum takes up more space

Last week brought good news as funding rates returned to neutrality and stayed there. Binance and Bybit crypto exchanges both reported 0.01% funding levels. The return to neutrality came when the bitcoin price started a comfortable rally that saw its break above $23,000.

Bitcoin financing rates

Funding rates return to neutral | Source: Arcane Research 

Open interest also followed the same path, although it rebounded during the week when the price fell again. It showed that there is still a lot of leverage going on in the market because bitcoin open interest was not much different than what was recorded in the previous week, even with the decline.

Bitcoin Traders Turn Upside

The recovery of Bitcoin funding rates to a neutral level is a testament to the return of positive sentiment among traders and investors. It certainly does not indicate that the market has returned to its previous bullish phase, but it is an indication that investors are now looking favorably on the Bitcoin market and cryptocurrencies in general.

Bitcoin price chart from TradingView.com

BTC retraces downwards | Source: BTCUSD on TradingView.com

It tracks along with the Fear & Greed indicator which has now moved out of the “Extreme Fear” area for the first time in nearly three months. She saw an incredible morale bounce back last week, with a score of 18 leaving her in a bit of a fright. Although the market remains fearful, the recovery is seeing faith return to the market. As evidenced by the increased buying pressure this week.

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The correlation of funding rates with the bitcoin price could be good or bad from now on, depending on how well the cryptocurrency is doing in the market. If it continues its recovery trend, funding rates may return above neutral for the first time in more than two months.

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

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