Bitcoin Funding Rates Remain Negative But Open Interest Tells Another Story
17 June 2022 - 9:00AM
NEWSBTC
Bitcoin funding rates have been dropping over the last couple of
weeks. Even as the price of the digital asset had plummeted,
causing some to call it being on ‘discount’, these funding rates
have refused to move out of the negative territory. The past week
has proven to be no different given that funding rates have exited
the neutral territory entirely and remain low. Funding Rates Refuse
To Budge Coming out of the last week has been a hard one for the
crypto market. The bloodbath had sent the majority of the coins in
the crypto market into the red and bitcoin had touched the $20,000
level for the first time since December 2020. Through this has come
panic across investors and the funding rates have reflected this
panic. Related Reading | Exchange Inflows Ramp Up As Crypto
Investors Clamor To Exit Market The past week had come to a close
with funding rates sitting well below neutral. This follows the
trend for the 7-day period where the funding rate had trended below
neutral each day. It sat at 0.013% as of Tuesday. Not the lowest
point so far but it marked the second-lowest point for the month of
June. This decline in funding rates follows what Arcane Research
refers to as an orderly sell-off in the derivatives markets. It is
no surprise given the liquidation volumes that rocked the market on
Monday and Tuesday, touching above $1 billion in a 24-hour period
and setting a new daily liquidation event record. Funding rates
remain low | Source: Arcane Research The research and analysis firm
also notes that investors are approaching the market with caution.
This is due to the “current market structure with increased
contagion risks related to Celsius and the pressuring macro
backdrop.” This caution comes as no surprise given that investor
sentiment now resides in extreme fear, meaning there is no room for
careless abandon in a market such as this. Bitcoin Open Interest
Turns The Other Way Even with the funding rates low, other metrics
are surprisingly not doing as bad. One of these is the bitcoin’s
open interest in the perpetual markets. This metric remains high
even though the price of bitcoin has plummeted close to 2017 highs.
Historically, BTC-denominated open interest has been known to
decline in line with the market. This has not been the case with
the most recent bitcoin crash. Instead of falling, open interest
had hit multiple new all-time highs even as the sell-offs had
continued. This suggests that some investors had believed that the
bottom was in and tried to take advantage of it. But this was not
the case. Open interest on the rise | Source: Arcane Research
Nevertheless, open interest in perpetuals was at 298,500 BTC as of
Tuesday. It is in stark contrast to the last major market crash
that took place back in December, where open interest in perps had
declined to 190,000 BTC as the price of the digital asset had
fallen. Related Reading | Bitcoin Crash Sends Institutional
Investors Running For The Hills This increase in open interest
suggests that if the bitcoin bottom is not in already, then it may
very well be reached soon. Although it is important to keep in mind
that a metric like this on its own cannot give a full picture of
when the bitcoin bottom will be reached. BTC drops to $21,000 |
Source: BTCUSD on TradingView.com Featured image from Arabian
Business, charts from Arcane Reseach and TradingView.com Follow
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