Quant Explains Pattern of Bitcoin Funding Rates Ahead of Uptrends
A quant has explained how a specific Bitcoin funding rate pattern has been ahead of trends in the asset’s price in recent months.
The Bitcoin 72 Hour MA Funding Rate Pattern That Can Start Uptrends
As explained by an analyst in a CryptoQuant post, the price has started to rise recently whenever the value has been close to zero within the negative zone. The “funding rate” is an indicator that measures the periodic fee that traders in the Bitcoin futures market currently exchange with each other.
When the value of this metric is negative, it means that the holders of short contracts are currently paying a premium to the long holders to hold their positions. Such a trend suggests that bearish sentiment is more dominant in the market right now.
On the other hand, positive values of the indicator suggest that longs are currently paying a premium to shorts, and therefore holders with a bullish mentality outweigh those with a bearish one.
Now, here’s a chart showing the trend of the 72-hour moving average (MA) Bitcoin funding rate over the past few months:
Looks like the 72-hour MA value of the metric has been positive in recent days | Source: CryptoQuant
As you can see in the graph above, the quant has marked the relevant parts of the trend for the 72-hour MA Bitcoin funding rates. It seems that there have been a few cases over the past few months where the indicator has just turned negative (ie still close to the zero mark) and the price of the cryptocurrency has followed up by picking up some momentum shortly after.
While the left and right instances in the chart got their metrics back into the positive zone not too long after this pattern formed, the middle instance saw it go much deeper into negative territory first, and that was only after the first leg up into the price for the financing rate to become positive again.
Based on this, it seems that a neutral to a negative value of the 72-hour MA Bitcoin financing has provided the right reason for the price to rise over the past few months.
Recently, the indicator has had positive values, which suggests that the total number of long positions has been overwhelming for the short positions. Although the calculation has gradually decreased in recent days.
However, despite this decline, the 72-hour Bitcoin funding rate is still significantly above the zero line, meaning that if the pattern that has seemingly held for the past few months is to form again, more bearish positions will need to be opened in the market to push the balance towards the negative zone.
BTC price
At the time of writing, Bitcoin is trading around $28,600, down 6% in the last week.
The value of the asset seems to have sharply gone down in recent days | Source: BTCUSD on TradingView
Featured Image by Kanchanara at Unsplash.com, Charts by TradingView.com, CryptoQuant.com
