Bitcoin funding rates plunged at May’s beginning. Although there was no bear trend, BTC’s price had already begun to show signs of weakness. The digital asset has plunged below $30,000 now, but it is back up. The market volatility did not affect funding rates which were previously at neutral.
Bitcoin Funding Rates Are Unshaken
Bitcoin experienced a massive sell-off at the $35,000 mark. These sell-offs were mainly caused by panicked investors who feared losing even more of their investments and therefore tried to exit Bitcoin to offset these losses. This was due to investors panicking about losing more of their holdings. As a result, the cryptocurrency price fell further. And, like clockwork every other market asset had been following this downward trend.
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The only thing that would remain immune from this downtrend was funding rates. It had recovered from the crash that occurred at the beginning of the month and was back at neutral. This is the level it maintained even though bitcoin fell below $35,000. Although bitcoin’s price fell, its funding rates remained unchanged.
Funding rates remain neutral | Source: Arcane Research
The trend is the same as that seen since December 4th’s crash. Since then, funding rates have remained at or near neutral. This was clearly due to the low momentum caused by negative sentiment among investors.
Perp traders are another group this indicates. The spot market has been closely followed by these perpetual traders. It is evident that this deviation from norm has occurred because, as we have seen with previous trends in the market, funding rates drop when the digital asset’s price falls.
BTC drops to $29,000| Source: BTCUSD on TradingView.com
It is clear that the perp traders want to add more exposure for longer periods of time with the digital asset. This is mostly happening at the bottom end of the trading range for one-and-a half years.
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Binance and Bybit have both shown the greatest presence of perp traders, with their average funding rates. Despite the entire Terra UST issue, funding rates are not changing.
Featured image taken from The Economics Times. Charts from Arcane Research and TradingView.com.
