Crypto Daily: What do low BTC funding rates mean for the crypto

Aug 26, 2022
09:08
2 min reading

Choise.com team

Bitcoin funding rates have remained low even when the price of the digital asset has rebounded. The trend for the previous week showed that investors remained extremely wary of the market, and there has not been a change for the new week either. This coincides with the general market sentiment falling back deep into the fear territory. This report takes a look at where the Bitcoin funding rates are currently and what it says about the market.

Funding rates remain below neutral

Back at the beginning of August, the Bitcoin funding rates had finally recovered to neutral, speaking some hope in the market. However, this was only short-lived as the funding rates had declined below neutral the following week.

Since then, there has been no significant positive change in the funding rate. Rather, it has continued to plummet, with only a few slight recoveries here and there. The last week was no different in this regard, as funding rates dropped below 0% once more.

It was most prominent on the Binance crypto exchange, where funding rates had reached their lowest point in the last two months. The crypto exchange has also not seen any recovery to the neutral level in the last two weeks, marking one of the most bearish trends for the exchange.



Source: Arcane Research

The funding rates remained low even when the Bitcoin open interest had recorded a marked recovery. It had jumped to near all-time highs at 370,000 BTC, but since there was no positive shift in investor sentiment, open interest had plummeted back to 364K BTC.

What this means for Bitcoin

Such a long stretch of time below neutral for Bitcoin funding rates can only mean one thing for the digital asset, and that is that traders are increasingly bearish towards Bitcoin for the short term. The two weeks of consistent below-neutral funding rates on the Binance exchange point to low demand for BTC at this time.

Bitcoin price analysis

Bitcoin price noted a sharp decline after the bulls were rejected at the $24,000 price mark a few days ago. Over the past week, the coin depreciated 7.6%. In the last 24 hours, Bitcoin price barely noted any movement. This indicated that the coin was trading within a consolidated price range.

The bulls are trying to re-enter the market but selling strength continues to increase. The coin however has managed to keep the price above the $21,000 support level. The technical outlook for Bitcoin has turned mixed, meaning there could be signs of reversal over the next trading session.

For a price reversal to successfully take place, buyers have to return to the market. BTC needs to soar past its immediate price ceiling of $22,000, else, a move to $20,000 will be incoming shortly. Demand for the coin has been low at higher levels and as long as that’s the case, BTC will continue to witness resistance.

Technical analysis

BTC’s constant mundane price action has pushed buyers out of the market. Buying strength was trying to recover but Bitcoin price has remained under the $22,000 mark for long enough. This has made the buyers underconfident.


Source: BTCUSD on TradingView

The Relative Strength Index shot up above the half-line briefly and then fell back underneath it. This signalled more sellers at press time. Bitcoin price managed to climb above the 20-SMA line and display that buyers were slowly starting to drive the price momentum in the market.

MACD underwent bullish crossover and formed green histograms which are buy signal. If buyers act on it then Bitcoin price might gain strength to move above the critical resistance of $22,000. With more sellers, $18,000 might start to act as the immediate price floor. Parabolic SAR pictures the price direction and dotted lines below the candlestick point towards bullishness.

Technical indicators

Hourly MACD – The MACD is now losing pace in the bullish zone

Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now above the 50 level

Major Support Levels – $21,500, followed by $21,000

Major Resistance Levels – $21,750, $22,000 and $22,650

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