Bitcoin has struggled to keep the $30,000 level over the past week. Although there has been a variety of reactions to the ETFs’ market, the perpetual traders appear to have seen this as an indication to stop their activity. This has resulted in a continuation or lower-neutral funding rate that was recorded over the last few weeks.
Bitcoin Funding rates Unmoved
The bitcoin funding rate has been hovering at neutral or below neutral for the past several months. This was true through market downtrends as well as recoveries. However, there were a few periods when funding rates did start to rise but those are short-lived.
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On the Binance exchange on May 12, 2018, the funding rate had seen a sharp rebound. Following that, funding rates were back trending below the neutral line. It is remarkable because open interest in perpetual rose to all-time highs.
Source: Arcane Research| Source: Arcane Research
Below-neutral funding rates have dominated the 21 bitcoin funding rate periods on Binance and Bybit. The total number of funding rates has been split into two groups: 5 were neutral funding rates and 16 have been neural. While the rates have been trading at a moderate discount to spot, perps continue to trade.
Leverage Still Surging
While bitcoin funding rates may have fluctuated, they have not had an impact on open interest (OI). OI had dropped significantly over the past week, but BTC open interest saw its decline retrace and increase by 41,000 BTC last week. The total OI reached a new record high of 290,000.BTC. This surpasses the May 4th peak of 282,000 BTC. Only a week later, open interest dropped more than 35,000 BTC.
Most often, open interest surges have occurred during times of low funding rates. Open interest tends to be lower when funding rates were neutral or high.
BTC does not hold more than $30,000| Source: BTCUSD on TradingView.com
This suggests that volatility will increase in the market. This can happen regardless of the price recovering or continuing to fall. Open interest growth usually follows a major recovery trend, such as that of the July 26th squeeze. It is more likely that there will be an increase in volatility, which will lead to a price recovery.
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Bitcoin is still the most popular cryptocurrency, with an estimated market capital of $552 billion. The price of Bitcoin is currently trading at $29,000.
CoinDesk's featured image and charts by Arcane Research and TradingView.com are the sources of this feature.
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