After the massive sell-offs that occurred at the start of the week, Bitcoin funding rates fell precipitously. After a slow weekend, Bitcoin made an impressive recovery but the sell-offs quickly erased all gains and the funding rates crashed. The result was one of the largest funding rates crashes in modern history. The fund reached one of the lowest levels since February.
Factors behind Decline
Due to Monday’s sell-offs, bitcoin funding rates fell. Particularly notable had been the fall in Bybit crypto exchange, which fell to its 3-month low of 0.03788%. It represented one of the largest declines of all cryptocurrency exchanges, of which Binance’s levels had stopped at 0.01378%. Even though funding rates fell to their February 2nd level, it was still a significant drop from the May 12th carnage.
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This trend of negative funding rates persisted for the whole week and culminated in the June fall. Due to the slowing of the perpetual spot market, Binance and Bybit both experienced negative rates. This shows that the prices of digital assets have a strong correlation with each other. They fell below $31,000 Monday night, and landed at $29,000 on Tuesday.
BTC funding rates see sharp decline | Source: Arcane Research
Binance’s fund rates are now at neutral-to-negative levels for half an year. After enjoying the most successful months of 2021, this is an unprecedented record. For the greater part of 2022, funding rates have remained in neutral or below neutral ranges. This is unlikely to change anytime soon.
Bitcoin trend after the decline
With the fall in funding rates came a decline in digital asset prices. Bitcoin had made steady gains but had now lost all of its capital and dropped to $29,000 on Monday. But, it would not last long. The digital asset would begin a reversal and would return to the $30,000 mark by Wednesday.
BTC settlements exceed $30,000| Source: BTCUSD on TradingView.com
The fact that many investors have returned to BTC in search of safe haven is another reason for this recovery. Altcoins won the bull rally of 2021 but losses in the bear market of 2022 meant that investors moved on to more solid digital assets, such as bitcoin.
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This means that bitcoin trades above its 20-day average, but still below its 50 day average. This shows that the bears are still holding the market, although there may be significant buy pressure.
Bitcoin was trading around $30,475 when this article was written. The cryptocurrency is continuing to recover in the morning hours of Thursday. However, the U.S. opening hours will open and more sales are anticipated, which should lead to a price decline.
PYMNTS featured image, Charts from Arcane Research and TradingView.com
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