Bitcoin price is in an uptrend, recently breaking $71,000. However, the funding rate across BTC perpetual futures is positive but low – what does this mean for June price action in the crypto market?
The crypto market is closely monitoring how Bitcoin performs. As bulls push the coin to near record highs, there is optimism that the world’s most valuable coin could be preparing for fresh all-time highs above $74,000.
This preview is welcomed, especially after an extended period of sideways movement.
Looks like #BTC short interest is rising on this move up as funding rate is falling and OI is rising. pic.twitter.com/PIA7vQH6uy
— Why Litecoin (@WLitecoin) June 4, 2024
Bitcoin Price Breaks $71,000: Will This Rally Continue?
After prices soared to $73,800 in March, the coin has been consolidating horizontally and even worryingly dipping to as low as $56,500 in May.
Millions of dollars worth of leveraged longs were liquidated in the process. However, in early June, things are looking up for Bitcoin.
Earlier today, the coin broke $71,000 and looks likely to break a key liquidation level at $72,000.
(BTCUSDT)
The problem is that not everyone is convinced that this rally will last. A closer look at exchange activity reveals a potential cause for concern: There is a lack of bullish conviction in the Bitcoin futures market.
One analyst examines the perpetual funding rate, a key indicator of sentiment among futures traders, and notes that it is uncharacteristically low despite rising prices.
While currently positive, the funding rate falls significantly short of levels seen in the last leg up to January 2024 when spot Bitcoin ETFs were approved. It is also way lower than when BTC rose to all-time highs in March 2024.
All Eyes On The Bitcoin Funding Rate
The funding rate is dynamic on platforms like Binance or Bybit, which allow the trading of BTC perpetual futures.
It is a payment reset every eight hours and exchanged between long (bullish) and short (bearish) positions in a perpetual futures contract.
The price differential between the perpetual Bitcoin futures price (an index) and the spot rate determines whether the funding rate will be positive or negative.
When positive, it means the perpetual BTC futures price is higher than the spot rate.
In this event, as is currently the situation, leveraged traders initiating long positions have to pay a fee to sellers. In essence, bulls are paying a premium, anticipating more price gains.
The higher the positive reading of the funding rate, the more bullish the crowd is.
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Funding Rate Positive But Lower: Are BTC Traders Taking Profits?
The current low positive funding rate in the Bitcoin futures market suggests a lack of enthusiasm among long position holders.
While there’s a bullish bias, it’s not as strong as observed during previous rallies.
As expected, this development raises questions about the sustainability of the current upswing.
If the funding rate fails to rise, whales and traders are likely to take profits.
Alternatively, it could mean that the big boys are hedging. Here, spot BTC holders actively take shorts on perpetual future platforms to protect themselves against price drops.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
