Bitcoin prices were brought to life again to start a new month in May after being a bit late on the last day of April. The best cryptocurrency then returned to nearly $98,000 and flirted at the much-needed $100,000 level to start the weekend.
Since losing its $100,000 price mark in early February, BTC has struggled to make a big positive run over the past three months. The latest on-chain data suggests that dreams of regaining a six-figure rating could really be on, and Bitcoin prices are about to resume Bull Run.
What negative funding rates do you mean for BTC prices?
In a recent Quicktake post on the Cryptoquant platform, on-chain analyst Amr Taha revealed that Binance’s Bitcoin funding rate has dropped significantly over the past few days. The “Funding Rate” indicator is a metric that measures the recurring fees exchanged between traders in the derivative (permanent futures) market.
A high or positive financing rate indicates that long traders (investors with buying positions) are paying fees to short traders (investors with selling positions). This direction of regular payments usually indicates the dominant bullish sentiment in that particular market.
Conversely, if the metrics on the funding rate have negative value, it means that investors with short positions pay traders at purchase positions in the derivatives market. This trend in funding rates indicates that the market is dominated by the Bears.
Source: CryptoQuant
According to Cryptoquant data, Binance’s Bitcoin funding rate, the world’s largest crypto exchange by trading volume, has fallen into a very negative territory of around -0.0008%. This development reflects the major changes in current market sentiment and dynamics.
In a Quick Take post, Taha attributes the recent decline in funding rates to aggressive sales by Bitcoin retailers. On-chain analysts then correlated sales pressure with fear among market participants rather than “a fundamental weakness.”
Taha says that if funding rates become too negative, the Bitcoin market is often susceptible to shorter apertures, and short traders are forced to cover positions due to rising prices, further driving upward movements. Furthermore, extremely low funding rates have historically been correlated with bottoms of local prices, preceding the reversal of bullish trends.
Bitcoin price at a glance
At the time of writing, BTC priced around $96,950, reflecting a 2% increase over the past 24 hours. Suppose BTC’s recent bullish momentum and latest on-chain observations are all. Assume that the best cryptocurrency is likely to return above $100,000 this weekend.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
ISTOCK featured images, TradingView chart
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