Bitcoin (Bitcoin) Funding rates – the fee set for balancing the price of a perpetual contract with the price of the underlying asset – have remained mostly negative, despite their recent rebound above $81,000.
The 30-day moving average (MA) of Bitcoin’s funding price continued to decline, reaching a historic low on May 6, according to… Analytics firm Cryptoquant. The last time such a decline in Bitcoin funding rates was recorded was during the FTX-triggered cryptocurrency capitulation in November 2022.
With the price of Bitcoin rising to a three-month high earlier this week, derivatives traders were willing to pay more to maintain their short exposure. Furthermore, Bitcoin’s open interest (OI) — a measure of all open derivatives positions at a given time — rose to more than $64 billion, a 109-day high, on May 5, as Feinbold did. I mentioned.
“Historically, such conditions often emerge during phases of uncertainty, where rallies are met with fading rather than aggressive long positions. Continued negative financing coupled with rising prices suggests the market may be climbing a wall of anxiety,” male.
What’s next for Bitcoin price amid extreme negative funding rate?
Bitcoin’s extremely negative funding rate has fueled the recent rebound in part through a sustained short squeeze — a bullish rally that occurs when rising prices force short sellers to cut losses and support buyers. Over the past 24 hours, of the $188 million liquidated in the Bitcoin derivatives market across all cryptocurrency exchanges, nearly $160 million involved short traders, according to Updates from Queen Glass.
BTC’s recent bullish sentiment has also been exacerbated by renewed institutional spot demand. For example, exchange-traded funds (ETFs) in the United States recorded four consecutive days of inflows totaling more than $1.6 billion, Finbold said. I mentioned.
As such, if Bitcoin’s price continues to rise on renewed spot demand, further pressure on existing derivatives sellers could spur further upside. However, if spot demand fails to counter intense selling pressure in derivatives, the major currency may reverse in the near term, which could form a new low in its overall bear market.
