Decline in Bitcoin-denominated open interest rates sees funding rates fall below neutral
Bitcoin funding rates have been on a bearish trend for the past few months. It has now spent one of its longest stretches in neutral and under neutral territory. But even with the recovering prices and sentiment in the crypto space, funding rates have refused to mirror the trend. Instead, it has spent another week below neutral, painting a gloomy picture of how traders view the market at the moment.
Traders do not expect recovery
Bitcoin funding rates are a good indication of when traders expect some sort of recovery in the coming days. Since the market crash in June, the price has refused to register any significant positive momentum, indicating that bitcoin traders do not expect a recovery going forward.
This comes even as the price of bitcoin has recently tested $25,000. Over the past week, the digital asset was able to increase its value by around $4,000, and even the declines have seen the digital asset record higher lows . Despite this, perp traders have refused to budge.
At this point, trying to figure out if perp traders are just bored in the market or not expecting any kind of significant recovery in the price of BTC is a difficult task. By and large, their exposure to the market has been short as they continue to shy away from long trades.
BTC funding rates remain below neutral | Source: Arcane Research
This has led to the market for bitcoin derivatives collapsing. BTC funding rates have now spent the first two weeks of August below neutral, and the exception is that they will continue to be so for the rest of the month.
Bitcoin Open Interest Tanks
At the start of the market recovery, the bitcoin open rate had been on a dramatic rise, suggesting that a brief squeeze had led to the price increase. It had held a respectable position after that, but in the last week, the tide has turned.
Where open Bitcoin interest had hit new highs, it retreated last week. This was when open interest in rival Ethereum had surpassed open interest in BTC for the first time in history. Open interest notional BTC came in at a low of $5.4 billion compared to Ethereum’s $8.2 billion.
The decline in Bitcoin open interest also coincided with the fall below neutral funding rates. This suggests that although the market may be in a slightly bullish state, traders expect the price to go down. However, the move to Ethereum shows that the same traders are predicting a high price growth of Ethereum after the merger.
Featured image from BBC, charts from Arcane Research and TradingView.com
follow Best Owie on Twitter for market insights, updates and the occasional funny tweet…
