The Bitcoin funding rate has dropped over the last few weeks. Even as the price of the digital asset had plummeted, causing some to call it being on ‘discount’, these funding rates have refused to move out of the negative territory. It has been no different over the past week, with funding rates remaining low and having left the neutral territory completely.
We refuse to adjust our funding rates
The crypto market has had a difficult week. This bloodbath saw the cryptocurrency market plunge into red, with bitcoin reaching $20,000 for the first-time since December 2020. Investor panic has resulted in a panicked market and funding rates reflect this.
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Funding rates were well below neutral for the week that ended. The trend of the past 7 days, where funding rates had been trending below neutral every day for seven consecutive days is now reversed. As of Tuesday, it was at 0.013%. It was not the lowest, but it marked June’s second-lowest level.
Arcane Research calls this an “orderly sell-off” in derivatives markets. This is why funding rates are falling. This is not surprising considering the massive liquidation volume that rocked Monday and Tuesday. It reached over $1 billion within a 24 hour period, setting a daily liquidation record.
Source: Arcane Research| Source: Arcane Research
Research and analysis company also noted that investors approach the market cautiously. This is due to the “current market structure with increased contagion risks related to Celsius and the pressuring macro backdrop.” This caution comes as no surprise given that investor sentiment now resides in extreme fear, meaning there is no room for careless abandon in a market such as this.
Bitcoin Open Interest is the Other
While funding rates are low, there are other metrics that aren’t doing so as badly. One of these is the bitcoin’s open interest in the perpetual markets. This number is still high despite the fact that bitcoin prices have fallen to near 2017 levels.
BTC-denominated open interests have historically fallen in line with market trends. The most recent bitcoin crash has shown that this was not the case. Despite the selling, open interest was not falling. Instead it had reached new highs. This could indicate that certain investors thought the bottom was here and wanted to capitalize on it. However, this wasn’t the case.
Arcane Research: Open Interest on the Rise| Source: Arcane Research
As of Tuesday, however, there was still open interest at 298,500 BTC in perpetuals. This is quite different from the December market crash, when open interest in perpetuals fell to 190,000. BTC because the value of digital assets had dropped.
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The increase in open interest indicates that the bottom of bitcoin may not be in yet. However, it’s important to note that even though this is a good indicator of where the Bitcoin bottom might be, it doesn’t give an exact picture.
BTC drop to $21,000| Source: BTCUSD on TradingView.com
Featured Image from Arabian Business. Charts from Arcane Reseach. TradingView.com.
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