Fun

Bitcoin’s funding rate turns negative, but have traders turned bearish?

News Feed - 2024-02-24 06:02:00

Marcel Pechman2 hours agoBitcoin’s funding rate turns negative, but have traders turned bearish?Bitcoin price continues to soften, but $251 million in inflows to the spot Bitcoin ETFs is a show of the markets’ strength.630 Total views1 Total sharesListen to article 0:00Market AnalysisOwn this piece of crypto historyCollect this article as NFTJoin us on social networksBitcoin (BTC) marked its highest daily close in over two years on Feb. 20, but the $52,500 resistance posed a tougher challenge than expected, resulting in a rejection below $51,000 on Feb. 23.


The Bitcoin futures contracts" funding rate briefly showed an excess of demand for short positions on Feb. 22, sparking speculation of potential further bearish momentum.


Considering Bitcoin posted a 33.5% year-to-date gain in 2024, bears have little cause for celebration, but some analysts believe that the $1 trillion market capitalization at $50,930 may represent a local top. While this level lacks inherent significance beyond being a round number, it has garnered attention from mainstream media, potentially instigating fear among investors.Spot Bitcoin ETF inflow will likely dictate BTC’s price


Various rationales have been put forth by analysts and traders to explain a potential Bitcoin correction, ranging from Relative Strength Index (RSI) divergences, detachment from Bitcoin-related stocks, and a historical lack of bullish momentum 60 days ahead of the halving, to the fact that around 2.5% of the supply was likely purchased near the $51,500 level.


However, none of these hypotheses should carry weight if the net inflow to the spot Bitcoin exchange-traded fund (ETF) persists. On Feb. 22, the net inflow on U.S.-listed Bitcoin ETFs amounted to $251 million, reversing the $36 million outflow observed on the previous day.


Predicting demand for Bitcoin ETFs is nearly impossible, so attention should shift to trading metrics to assess if traders are leaning bearish after multiple failed attempts to sustain prices above $52,500. Perpetual contracts, also referred to as inverse swaps, incorporate an embedded rate recalculated every eight hours. In essence, a negative rate indicates a preference for higher leverage being utilized by shorts (sellers).Bitcoin perpetual futures 8-hour funding rate. Source: Coinglass


Notice that Bitcoin"s 8-hour funding rate briefly turned negative on Feb. 22 and last stood above 0.02% (or 1.3% per month), signaling a lack of demand for leverage longs (buyers). However, fluctuations in funding rates are not uncommon as market makers pursue profit through rate arbitrage, taking advantage of specific snapshot times.


Related:How to buy USD Coin (USDC) in the United StatesRetail investors’ demand for Bitcoin is a lagging indicator


To confirm whether the absence of demand for leverage longs accurately reflects the market"s condition, one must cross-reference the data with other indicators, such as the demand for stablecoins in China, a significant signal for retail entry or exit from crypto markets.USC Coin (USDC) peer-to-peer trades vs. USD/CNY. Source: OKX


The USD Coin (USDC) stablecoin premium versus the official yuan rate in China has maintained a robust level above 2% since Feb. 12, recently reaching a peak of 3.5%. This serves as a reliable proxy for retail money entering cryptocurrencies. However, it cannot be denied that the last time the BTC 8-hour funding rate stood above 0.03% (1.9% per month) was on Jan. 2. Consequently, retail traders using leverage missed the entire 30% gain from $40,000 to $52,200 in the 30 days leading to Feb. 20.


Google search trends for "buy Bitcoin" confirm the lack of interest from retail traders despite the recent price gains. On the flip side, this data provides evidence that the potential entrance of a new wave of investors driven by FOMO remains possible.Search trends index, weekly. Source: Google Trends


The peak interest in the past 5 years occurred in the week ending Jan. 9, 2021, after Bitcoin’s price had already surged by 150% in two months. This underscores the idea that the absence of demand for leverage longs using Bitcoin perpetual futures doesn"t necessarily indicate bearish sentiment or a lack of interest from retail. In the end, the slightly negative futures funding rate for Bitcoin futures shouldn"t overly concern bullish investors.


This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.# Bitcoin# Cryptocurrencies# China# Funding# Bitcoin Price# ETF# Markets# Cryptocurrency Exchange# Yuan# Stocks# Stablecoin# Market AnalysisAdd reactionAdd reaction

News Feed

BTC price inches up with US stocks as Bitcoin bulls fight for $65K
William Suberg8 hours agoBTC price inches up with US stocks as Bitcoin bulls fight for $65KBitcoin sees a round of automated selling as BTC’s price vies with battered US stocks for a short-term recovery.1532 Total view
Coinbase shares rise 3% as Q2 crypto trading doubles from last year
Brayden Lindrea8 hours agoCoinbase shares rise 3% as Q2 crypto trading doubles from last yearCoinbase has marked its third consecutive quarter in the black, with its net revenue and trading volumes jumping 108% and 145%,
Gareth Jenkinson11 hours agoGrayscale submits SEC filing to convert Ethereum Trust to spot ETFCrypto asset manager Grayscale has filed an application with the U.S. SEC to convert its Ethereum Trust to a spot Ethereum ETF
Ciaran Lyons7 hours agoBitcoin ETF approval nearing, but brace for more setbacks: BitGo CEOIn a recent interview with Bloomberg, Mike Belshe, CEO of crypto exchange BitGo, stated that the market structure needs to improv
Bitcoin To Blast Off? Trump’s Fury Over Interest Rates Signals Big Move
Este artículo también está disponible en español. Bitcoin experts are buzzing as President-elect Donald Trump lashed out against current Federal Reserve policy, calling i
Louisiana’s new crypto law protects node operators, bans CBDC
Ana Paula Pereira5 hours agoLouisiana’s new crypto law protects node operators, bans CBDCThe U.S. state of Louisiana has updated its legislation to ban the use of central bank digital currencies and establish rules for
XRP Price To Break Out Of Consolidation: The Next Moonshot That Will Lead To $3
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
Bitcoin DeFi ecosystem thrives despite market correction
Zhiyuan Sun4 hours agoBitcoin DeFi ecosystem thrives despite market correctionThe Bitcoin DApp ecosystem has been reinvigorated by the invention of native protocols such as Ordinals and Inscriptions last year.1687 Total
Otis Launches NFT Auction Platform That Transforms Real-World Items Into Digital Collectibles
Otis Launches NFT Auction Platform That Transforms Real-World Items Into Digital Collectibles As both fractional and traditional non-fungible tokens (NFTs) have seen exponential gr
BTC Hashrate Follows Price Drop – 20% Lower Before Bitcoin Halving
BTC Hashrate Follows Price Drop - 20% Lower Before Bitcoin Halving Four days ago, digital currency markets lost billions and prices sank to levels not seen since last March. The
Ethereum scaling ecosystem’s combined TPS hits new all-time high
Brayden Lindrea3 hours agoEthereum scaling ecosystem’s combined TPS hits new all-time highOver 41% of those transactions took place on Xai, a new Ethereum layer-3 scaling solution focused on gaming applications.1126 To
Zhiyuan Sun5 hours agoVietnamese Web3 coalition Ninety Eight launches $25M ecosystem fundThe capital will be dedicated to supporting Web3 startups in Asia.741 Total views7 Total sharesListen to article 0:00NewsJoin us on