It has been a difficult few weeks for Bitcoin, which is still being felt by many. This has seen bitcoin’s price crumble below $30,000 once more. The digital asset has also suffered some more severe news. The funding rates have been among the most bearish indicators in the digital asset’s massive fall.
Get a Dive on Funding Rates
Although the Bitcoin price had dropped to $40,000, the Bitcoin funding rates were in an unusually low state. It had been mostly stable or slightly below neutral, so it is not surprising that there was a sudden fall in funding rates. The extent to which funding rates had fallen was worrying. The funding rate has plunged to a new low, putting them at yearly highs.
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Arcane Research says that the plunge occurred amid the recent sell-offs. Funding rates had dropped across the major space exchanges. The funding rate dropped to a mere -0.0042% at Binance, the largest exchange.
Rates of funding fall to annual lows | Source: Arcane Research
Interesting fact: Despite trending downward, funding rates haven’t been as low since July 2021. It is therefore the largest dip in market activity in the past year.
The previous week’s neutral funding rates were due to traders being already bearish. The larger market expects more bearish trend and is therefore taking steps to protect itself.
This Is the Trigger: Bitcoin Long Liquidations
The bitcoin price plummeted below $30,000 and had seen one of the worst liquidation trends in recent history. The liquidations reached $0.73 billion, which was the largest liquidation since the December 4th crash.
BTC price declines below $29,000 | Source: BTCUSD on TradingView.com
This had clearly been the case for future and perp traders, which in turn affected funding rates. Funding rates fell a lot because perpetual markets traded significantly below spot market after liquidations.
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After May 12, funding rates started to rebound. After briefly returning to neutral, the funding rates dropped back. The fall rate is not as steep as in the past fall.
The report shows that funding rates are well below neutral. This means that the perp traders remain very bearish about the market and aren’t investing as much in the digital asset.
Cryptocoin Spy featured image, Charts from Arcane Research, and TradingView.com
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