Bitcoin prices have recovered considerably over the past few weeks, raising questions about the sustainability of this fresh bullish momentum. It is still unclear whether the flagship cryptocurrency is setting a bull trap or whether it legally claims the newest ever-highest price. However, the latest on-chain data suggests that Bitcoin prices may be at the start of a strong upward trend.
Is there a correlation between BTC prices and Binance funding rate?
In a quick take post on the Cryptoquant platform, on-chain analyst Burak Kesmeci explored how to use Binance’s funding rate to analyze Bitcoin’s price trajectory in the short term. In the context, the “Funding Rate” metric measures the periodic charges exchanged between traders in the derivative (permanent future) market.
A positive funding rate indicates that long traders (investors with buying jobs) are paying fees to short traders (investors with selling jobs). This trend in regular rates indicates the prevalence of bullish sentiment in the crypto market.
On the other hand, a low financing metric means that short position investors are paying longer traders in the derivatives market. This direction of funding suggests that the market is dominated by short sellers.
According to Kesmeci, a detailed assessment of Binance’s Bitcoin funding rate over the past 30 days shows a clear correlation with short-term price movements. When funding rates were positive, BTC prices typically experienced a significant increase in the short term.
Source: CryptoQuant
On-chain analysts highlighted two scenarios over the past month, where BTC prices were strongly correlated with funding rates. First, Bindence’s Bitcoin funding rate entered positive territory, reaching a strong level (over 0.0030) between April 10th and April 22nd, with prices rising from $79,000 to $93,000 at the same time.
Between May 6 and May 10, the funding rate once again entered positive territory, with Bitcoin prices rising from $95,000 to $103,000 during this period. According to Kesmeci, Binance’s funding rate (the world’s largest exchange by trading volume) is crucial to the trajectory of BTC prices.
Kesmeci concluded that the rise in the spot market, strengthened by positive funding rates in the futures market, suggests a short-term upward trend in Bitcoin prices. With even more bullish momentum, it’s only a matter of time before the best cryptocurrencies regain the highest prices of the present and perhaps fake new ones.
Bitcoin price at a glance
At the time of this writing, the BTC priced around $103,605, reflecting the 0.5% jump over the past 24 hours.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
ISTOCK featured images, TradingView chart
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