Bitcoin Funding Rate Turns Negative, But Are Traders Left Behind?
Bitcoin (BTC) marked its highest daily close in more than two years on February 20, but the $52,500 resistance posed a tougher challenge than expected, resulting in a rejection below $51,000 on February 23.
Funding volume of Bitcoin futures contracts on February 22nd showed interest in short positions, prompting speculation that further bearishness could occur.
Bears have little cause for celebration when we consider that bitcoin has posted a 33.5% year-to-date gain through 2024, but some analysts believe that the $1 trillion market capitalization at $50,930 may represent a local high. While this rating is nothing more than a round number, it has attracted attention from the mainstream media, which can cause concern among investors.
Spot Bitcoin ETF can determine the price of BTC.
Aside from the relative strength index (RSI) divergence, the divergence of Bitcoin-related stocks, and the lack of historical bullishness in the 60 days prior to the decline, various reasons have been offered by analysts and traders to explain Bitcoin's correction. About 2.5% of the supply was bought around the $51,500 level.
However, none of these hypotheses should carry any weight if it goes to the spot Bitcoin Exchange Traded Fund (ETF). In the year
Bitcoin ETF demand is nearly impossible to predict, so after several failed attempts by traders to secure a price above $52,500, attention should shift to trading parameters. Perpetual contracts, also called reverse swaps, include an embedded rate that is calculated every eight hours. Basically, a negative rate indicates a preference for higher leverage used by shorts (sellers).
Note that Bitcoin's 8-hour funding rate briefly turned negative on February 22nd and finally settled above 0.02% (or 1.3% for the month), indicating a lack of demand loggers (buyers). However, as market makers pursue their profits through arbitrage, it is not uncommon for financial rates to fluctuate using specific timeframes.
Related: How to Buy USD Coin (USDC) in the United States
Retail investor interest in Bitcoin is a lagging indicator.
Stable coin demand in China, a major signal for retail entry or exit from crypto markets, should cross-reference the data with other indicators to ensure that the lack of demand accurately reflects market conditions.
The USD Coin (USDC) stable coin premium against the yuan in China has maintained a strong level of more than 2% since February 12, recently hitting a high of 3.5%. This retail currency serves as a trusted proxy for access to cryptocurrency. However, it cannot be denied that BTC's 8-hour financial support was more than 0.03% (1.9% for the month) last time on January 2nd. Therefore, the 30% profit used by retailers will be missed in the range of $40,000 to $52,200. 30 days leading up to February 20th.
Google search trends ‘Buy Bitcoin' confirm lack of retail interest despite recent price gains. On the flip side, this data provides evidence that a new wave of FOMO-driven investors may be entering.
The highest interest rate in the last 5 years occurred in It's in the week ending January 9, 2021, after Bitcoin's price surged 150% in two months. This underscores the idea that a lack of demand using Bitcoin durable futures does not indicate a lack of bearish sentiment or retail demand. Ultimately, the slightly negative future funding rate of Bitcoin futures shouldn't worry bullish investors too much.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
