Bitcoin funding rates first fell below the neutral level in January. For the longest time, funding rates have fluctuated between neutral and above neutral. This new trend has lasted longer than expected as the digital asset’s price continues to struggle. We examine the status of bitcoin funding rates and what the future holds if this trend continues.
The Funding Rates are Below Neutral
Although bitcoin funding rates fell to neutral in June 2017, the cryptocurrency’s price was well above $30,000. Since June, when bitcoin funding rates had fallen below neutral in June, the price of this digital asset was still trading well above $30,000. However since then multiple crashes have caused it to lose over $10,000 and continues to struggle to maintain its peak.
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Although minor up-grades have been made since, funding rates refuse to move despite these. As of the writing this, funding rates had spent the entire month below neutral.
Binance and Bybit are some of the most prominent platforms when it comes to calculating funding rates and the last time the crypto exchanges had seen funding rates in the neutral level since bitcoin’s fall from $30,000 had been in mid-June. The funding rates now reflect the price movement and are not recovering.
Rates of funding remain at neutral -- Source: Arcane Research| Source: Arcane Research
This is in spite of a recent surge in bitcoin open interests, which has reached an all-time high. The funding rates are following low yield rates in the market and have diverged from open interest.
Bitcoin to Recover
With bitcoin’s price above $20,000 once more, there has been some positive sentiment returning to the market. It is still uncertain as there are not many support options at the moment and it can be easily pulled down by bears.
The decline in bitcoin funding rates is a reason for concern. The funding rates will naturally rise if the value of bitcoin drops as much. However, the reverse has happened so far. This means that not much new money is coming to the sector, if at all.
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For a prominent recovery in bitcoin’s price, an uptick in funding rates would need to be seen. The wider market will follow a positive sentiment among the perp traders.
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The inflation rate reported by the CPI on Wednesday was also higher than anticipated. While this caused bitcoin to spike, it was a temporary one. This market must see greater buying momentum in order to sustain it.
Featured Image from CNBC. Charts from Arcane Research and TradingView.com.
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