A Critical Analysis of Bitcoin's Latest Data: Negative Funding Rates and Open Interest - COINTURK NEWS
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A Critical Analysis of Bitcoin’s Latest Data: Negative Funding Rates and Open Interest

3:44 pm (35 days ago)
August 21, 2023

As the year-end decline continues to plague the cryptocurrency market, bears remain on the horizon for Bitcoin. According to a recent post by a popular on-chain sleuth, BTC‘s funding rates have dropped into negative territory. This could mean that the majority of investors are looking to profit from price declines.

Critical Data for Bitcoin!

Funding rates are periodic payments made to short or long investors. They are primary forces used to maintain the balance between perpetual contract prices and the underlying cryptocurrency’s spot price. In a bearish market, funding rates turn negative, indicating that dominant short investors are paying long investors.

While funding rates suggest price declines, Open Interest (OI) has revealed a series of intriguing findings. Bitcoin has seen a surge in its 24-hour trading volume, reaching $26,260. This increase in OI completed with a price increase indicates the influx of new capital into the market. Experts often view this as a bullish signal.

Futures Market Activity in BTC!

However, as BTC dropped to $26,000, expectations among investors diminished. OI also declined. Yet, zooming out on the bigger picture reveals that both the price and OI have been declining together since the crash on August 17. This can be interpreted as a bullish signal as it indicates the end of a downward trend once all long position holders have liquidated their assets.

The Long/Short Ratio chart moved in a similar manner. Claims of price increases for BTC temporarily overshadowed claims of price losses. However, as the spot price dropped, long investors stepped back. According to the latest reading of the Bitcoin Fear and Greed Index, market sentiment was neutral. The leading cryptocurrency mostly reacted to news about spot exchange-traded funds (ETFs) applications in the past two months. In the absence of any new developments, Bitcoin may once again be trapped in a narrow trading range.

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