What The Negative Bitcoin Funding Rates Say About Investor Outlook

Even though the cryptocurrency’s price has risen, Bitcoin funding rates have been low. The previous week’s trend showed that investors were extremely cautious about the market. There has been no change in this for the week. The general market sentiment is back in fear territory. This report examines the current bitcoin funding rates and its implications for the market.

The Funding Rates are still below neutral

The bitcoin funding rate had reached neutral at the start of August. This was a sign that there was some hope for the market. But, it was short-lived. The funding rates fell below neutral over the next week.

The funding rate has not seen any significant improvement since then. Instead, the funding rate has continued to fall, with just a few small recoveries. As funding rates plunged below 0%, the past week was not any different.

This was especially evident on Binance’s crypto exchange where funding rates were at their lowest level in two months. Also, the cryptocurrency exchange hasn’t seen any improvement to its neutral level over the last two week. It is one of most bearish trend for the exchange.

bitcoin funding rates

Rates of funding remain at neutral -- Source: Arcane Research| Source: Arcane Research

Even after a significant recovery in bitcoin open interest, the funding rates remained very low. Although it had reached an all-time high of 370,000 BTC, there had been no shift in investor sentiment and open interest dropped to 364K BTC.

How this affects Bitcoin

A long time of bitcoin funding rates below neutral can only signify one thing. This is why traders have been increasingly negative about bitcoin short term. Two weeks of consistently below neutral funding rates at Binance indicate low BTC demand.

Bitcoin price chart from TradingView.com

 Source : BTCUSD at TradingView.com| Source: BTCUSD on TradingView.com

The same holds true for crypto markets in general. Perpetual traders favour short liquidations, but they still place conservative bets. All this happens while the open interest is high. Therefore, perps are trading below spot prices.

But, a prolonged period of low funding rates for digital assets isn’t always bad. These trends are a great place to get a shot at squeezing, provided there’s a significant increase in investor interest. Bitcoin investors prefer to avoid the market, and are placing conservative bets.

Featured Image from Coingape. Charts by Arcane Research and TradingView.com.

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