Bitcoin funding rates have rebounded from their September 2020 lows, so they have been trending sideways since April 18.
Many analysts watch Bitcoin funding rates because they can predict the upcoming trends in the flagship cryptocurrency market. In retrospect, they mean regular payments that traders with open short positions pay to those with open long positions, all based on the difference between the perpetual contract market and the spot rate.
A positive funding rate reflects traders’ bullish bias and shows that long traders are paying short traders in a market that appears to be sharply upward. When the Bitcoin funding rate goes negative, it means that the traders are bearish, which means that short traders are paying long traders.
… Based on the Arcane Research report, funding rates have been neutral for more than a week. The research and analysis firm added that the short-term bias conflict between bears and bulls would ultimately favor the latter, as Bitcoin price rebounded incredibly earlier this week.
The BTC / USD exchange rate fell more than 27 percent after hitting its record high of $ 64,899 on April 14. The couple only showed signs of recovery until Monday. The recovery declined as much as 12 percent over a one week period, which coincided with the neutralizing funding rates.
“The fact that the funding rate remained neutral in the face of Bitcoin’s strong rebound yesterday bodes well for the future,” wrote Arcane Research.
Bitcoin Price vs. Funding Rates. Source: Arcane Research
Further bullish tailwinds for Bitcoin resulted from declining open interest. Citing derivatives market data from April 27th, Arcane Research found that unresolved BTCUSD contracts hit their lowest level since March 8th. This reflected a more cautious sentiment in the derivatives market. This also meant that the ongoing rebound in Bitcoin prices depends entirely on the spot markets.
“It makes the current price movement more sustainable,” added Arcane Research.
One reason Arcane Research appeared optimistic is the ability of the derivatives market to drive Bitcoin prices wild. Traders typically open high-leverage trades as they expect maximum returns from precarious positions. However, when their bets fail, their tendency to sell their real bitcoin assets increases to cover their margin positions. All in all, this drives the pressure to sell in the market.
What’s next for Bitcoin?
According to ByBt.com, the Bitcoin options contract, which expires on April 28, has a majority target of $ 52,000. This increases the pressure on the bulls to protect the market from possible bearish attacks. Should they fail, a collapse towards the aforementioned lower level is to be expected.
It also coincides with the simple 100-day moving average that served as support for the ongoing Bitcoin price rally.
Bitcoin bounces off the purple wave (100-DMA). Source: BTCUSD on TradingView.com
As of now, the BTC / USD exchange rate appears to be above its 20-day exponential moving average (20-DMA).
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