Bitcoin Financing Rates Remain Negative for More Than a Week
On-chain data shows that Bitcoin funding rates have been largely negative for over a week now. If the past trend is anything to join, it could mean a bottom is near.
Bitcoin funding rates have now remained largely negative for more than seven days
As noted by an analyst in a CryptoQuant afterBitcoin funding rates have been largely negative for the past week.
The “funding rates” is an indicator that measures the periodic fee Bitcoin futures traders have to pay each other to hold their positions.
When the value of this indicator is positive, it means that longholders are currently dominant and pay a premium to short traders. Such values occur when market sentiment is predominantly bullish.
On the other hand, negative funding rates imply that shorts now outweigh longs and are willing to pay a fee on longs. Trends like this may indicate that majority sentiment among traders is bearish right now.
Related literature | Why Bitcoin could reach $90K by the end of 2022, according to this forecast?
Here is a chart showing the trend in BTC funding rates since April last year:
It seems that the value of the indicator has recently been negative | Source: CryptoQuant
As you can see in the chart above, Bitcoin funding rates have been largely negative for over a week.
Related literature | This Bitcoin Volatility Index Pattern Suggests A Short Pressure May Be Near
Such readings suggest that sentiment among the majority of futures market traders appears to be bearish right now.
The chart also shows that the last time such negative funding rates lasted longer than this was back during the mini bear market between May and July 2021. A bottom formation occurred during this period.
Therefore, the figure in the post notes that the current negative funding rates may provide the ideal conditions for a trend reversal.
At the time of writing, Bitcoin’s price is hovering around $37.3k, up 11% over the past seven days. In the past month, the crypto has lost 20% in value.
The chart below shows the trend in the price of BTC over the past five days.
The price of BTC has largely moved sideways in recent days | Source: BTCUSD on TradingView
A few days ago, Bitcoin’s price hit as high as $38.6k, before returning to current levels. At this point, it’s unclear when the price of the coin will recover, but if funding rates are anything to consider, a bottom could be forming in the current conditions.
However, it’s worth noting that during the May-July consolidation, it took about three months of negative funding rates to bottom out.
Featured image from Unsplash.com, Charts from TradingView.com, CryptoQuant.com