Bitcoin is struggling to hold the $30,000 level for the better part of this week, failing more often than not. While there have been various reactions from different parts of the market such as ETFs, it appears that frequent traders have taken this as a signal to discontinue their activities. This has resulted in the continuation of the neutral or below-neutral funding rates that were recorded in the past two weeks.
Bitcoin funding price unaffected
Over the past few months, bitcoin funding rates have been tied to neutral levels and below neutral levels. This was the case with the market recovering and its bearish trends, although there were periods of slight deviations as funding rates recovered to positive but even these were short-lived.
Funding rates last saw a sharp recovery on May 12 on the Binance exchange, after which funding prices reverted back to trend at the neutral line and below the neutral line. This is interesting given that open interest in the perpetual continuation has risen to an all-time high during this time.
Funding rates fall below neutral | Source: Arcane Research
Funding rates below neutral have dominated the 21 bitcoin funding rate periods on Binance and Bybit exchanges. A total of 16 had neuronal funding rates while 5 were neutral funding rates. All this time, the perpetrators continued to trade at a reasonable discount on the spot.
Leverage is still rising
Although the bitcoin funding price has been choppy, it hasn’t affected the open interest (OI) performance. OI dropped significantly in the previous week but last week saw a correction in open interest denominated in bitcoin in its stride and an addition of 41,000 bitcoins. This brought the total OI denominated to an all-time high of 290,000 BTC, surpassing the previous May 4 high of 282,000 BTC. Just a week after open interest plunged over 35,000 BTC.
Mostly, the increase in open interest rates came in the wake of times when funding rates were below neutral. At times when financing rates are neutral or above neutral, open interest usually goes down.
BTC fails to hold above $30,000 | Source: BTCUSD on TradingView.com
What this indicates is that there is likely to be more volatility in the market. This can happen regardless of whether the price recovers or continues to decline. However, the growth in open interest usually precedes a trend of recovery as large as that recorded during the short pressure period on July 26. So, most likely, it will be a price rebound that will follow this spike in volatility.
Related reading | Bitcoin on-chain activity throttled after LUNA crash
Bitcoin remains the largest cryptocurrency in the space with a market capitalization of $552 billion. It is up 5.10% in the last 24 hours to trade at $29,200 at the time of writing.
Featured image from CoinDesk, charts from Arcane Research and TradingView.com
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