Will Bitcoin (BTC) Continue to Appreciate After Funding Rates Reset?
More than $300 million has been lost in the crypto market in the past 24 hours, with Bitcoin (BTC) surging by around 5%. In this case, the sky is broken, and the financial, environmental, and economic conditions are back on the ground.
The funding rate is a payment that helps balance the asset's ongoing futures contract value with its spot price. If the perpetual futures contracts trade at a premium, long traders pay funding fees to short traders, and vice versa.
Traders are anticipating continued improvement after the resumption of Bitcoin (BTC) funding
The screenshot below shows that over the past seven days, long traders have had to pay funding for Bitcoin in the range of 0.21% to 0.38%. For altcoins like XRP, these fees are as high as 0.89%.
Finance rates, in addition to being just fees that help keep futures prices close to spot prices, act as indicators. High Bitcoin funding rates, in a positive direction, indicate the presence of excessive optimism in the futures market.
In such a situation, the chances of unexpected breakdowns increase by destroying long distances.
Read more: Where to Trade Bitcoin Futures: A Comprehensive Guide
On Tuesday, open interest in the futures market stood at $33.67 billion. While in the bullish market, Bitcoin open interest reached a new high of over $17 billion.
Open interest indicates interest in the participant's (futures/options) market. Higher interest rates mean higher volume of derivatives transactions are active in the market.
Read more: Best Crypto Derivative Exchanges in 2023
Bitcoin fell 5% to $35,000 on Tuesday, easing open interest slightly as it returned the currency to neutral.
The 5 percent return resulted in more than $300 million in outflows in the past 24 hours.
That being said, some traders believe that Bitcoin is ready to continue its rise. Crypto trader Mr. Crypto wrote on Twitter:
“Bitcoin funding rates have resumed, with most long positions exiting the market. We are ready to continue our upward trend.
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