- Bitcoin’s Funding Rates on DyDx and Deribit have turned positive.
- The coin’s “flat” Open Interest signals that market participants are unsure of its short-term price direction.
As an analyst with a background in financial markets and experience in crypto analysis, I believe that Bitcoin’s (BTC) recent surge in positive Funding Rates on exchanges like DyDx and Deribit is a bullish signal for the cryptocurrency. The rising demand for long positions suggests that market participants are increasingly optimistic about BTC’s price growth.
As a crypto investor, I’ve noticed an intriguing development with Bitcoin [BTC]. After a short-lived surge above $63,000, the cryptocurrency has sparked a significant increase in Funding Rates on derivatives exchanges like DyDx and Deribit. According to Santiment’s recent post on X (previously known as Twitter), this trend is worth keeping an eye on.
As a researcher studying the crypto market, I have observed an uptick in Bitcoin’s funding rates on exchanges such as DyDx and Deribit. To prevent a potential repeat of last week’s price top, those with bullish sentiments towards cryptocurrencies are keen to keep fear of missing out (FOMO) levels low. Ideally, they would like the number of short positions opening at an equal or even greater rate than long positions.
— Santiment (@santimentfeed) May 13, 2024
Based on information from a reputable on-chain data provider, as of May 13th, the funding rates for Bitcoin on dYdX and Deribit were 0.0012% and 0.037% respectively.
As a crypto investor, I’ve noticed that despite a small price pullback from the $63,000 mark in recent days, Bitcoin (BTC) prices have still been on an upward trend at press time. According to CoinMarketCap’s data, BTC was trading at $61,928.
In the context of perpetual futures contracts, Funding Rates serve as adjustment mechanisms to keep the contract’s price aligned with the current market price (i.e., the spot price).
When the Futures Funding Rate of an asset experiences a significant increase, it’s a sign of robust interest in holding long positions. This bullish indicator foreshadows further price escalation for the asset.
In contrast, low funding rates indicate a strong appetite for taking on short positions. This is a bearish indicator, meaning investors are placing wagers that the asset’s value will decrease.
Not all BTC traders are convinced
The funding rates for Bitcoin’s futures contracts have increased, but the open interest for these contracts has fluctuated between $29 billion and $30 billion on Coinglass since early May.
The Open Interest of a futures contract for an asset represents the current number of outstanding positions that have not been closed or settled, reflecting the market’s collective commitment to these contracts and their underlying asset.
During times when the market swings only slightly within a confined range, traders tend to maintain their existing positions rather than making significant new entries or exits. Such situations frequently occur in markets with minimal price fluctuations.
An assessment of BTC’s volatility markers on a daily chart confirmed this.
The daily fluctuation of the coin’s price, as indicated by its Average True Range (ATR), has been decreasing since the 19th of April. This indicator calculates the average difference between high and low prices over a given time frame to gauge market volatility.
From my perspective as a researcher, when an asset’s Average True Range (ATR) decreases, it implies that the price volatility is shrinking. Currently, Bitcoin’s ATR stands at 2618.68.
BTC’s “flat” Open Interest might have been due to traders’ lack of strong conviction regarding its short-term direction.
Read Bitcoin’s [BTC] Price Prediction 2024-25
Despite momentarily surpassing $63,000 and causing a spike in Funding Rates, the market’s self-assurance has been reinstated.
As more traders take long positions, the coin’s Futures Open Interest is expected to spike.
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2024-05-14 17:12