Bitcoin
Bitcoin Futures Funding Rates Show Traders Still Bullish Despite Defeat
Despite the recent market rout, Bitcoin and Ethereum funding rates in perpetual futures contracts are still bullish, according to data from the CoinGlass.
Financing fees are periodic payments made between traders who are long (bullish) and short (bearish) on perpetual futures contracts. Unlike standard futures contracts, which have an expiration date, perpetual contracts do not have an expiration date. And so financing helps keep the price of a perpetual futures contract close to the spot price of its underlying asset.
When funding rates are positive, as they are at the time of writing, long traders pay a fee to short traders to keep their contracts open. As of Tuesday morning, Bitcoin open interest-weighted funding rates were 0.0024%, according to CoinGlass.
Why is this optimistic? It is an indicator that there are more traders opening long positions than short positions.
Therefore, current market sentiment – measured by Bitcoin derivatives activity – is still slightly more positive than negative. It is also a sign that traders holding long positions already open are confident that their gains will eventually outweigh their funding costs.
There are other signs that plunging prices have not completely erased bullish sentiment among Bitcoiners.
Philip Swift, founder of analytics platform Look Into Bitcoin, noted on twitter that BTC’s recent drop has dropped it to its 128-day moving average. It is a technical analysis metric that became popular during the 2017 bull runwhen the Bitcoin price often bounced back after touching the line, He explained.
If the BTC price were to follow the same pattern as then, then the 128DMA “usually, but not always, acts as good support in Bitcoin bull markets,” he wrote.
At the time of writing, Bitcoin was trading at just over $65,000 after falling to $64,548.57 – its lowest value in the past month.
There are other tepidly optimistic signals outside of the crypto markets as well.
Algorithmic crypto trading firm Wintermute recently highlighted in a note that the tide may be turning at the Federal Reserve, which is responsible for setting interest rates in the U.S.
Historically speaking, lower interest rates on Treasury bonds encourage traders to allocate more assets to riskier assets like stocks and cryptocurrencies.
This is why the market recently sank when new comments from Minneapolis Federal Reserve President Neel Kashkari indicated that the Fed might not cut rates until December. Until recently, investors held out hope for a rate cut in September.
But perhaps the Fed will give in to peer pressure from other major central banks, Wintermute argued.
“The current bearish sentiment may be short-lived as global central banks such as the Bank of Canada and the European Central Bank have already initiated rate cuts, suggesting a global shift towards monetary easing,” the firm wrote.