Bitcoin’s funding rate has been negative over the last couple of weeks. Last week saw the funding rate exit the neutral territory even as bitcoin prices continued to plummet. This past week was a hard one for every crypto stakeholder, as most of the coins were in a bloodbath. Bitcoin crashed and touched the $20,000 level for the first time since December 2020. This market downturn led to panic as investors were left confused. This left the funding rate of bitcoin to be badly affected.
On Tuesday, the funding rate of Bitcoin sat at 0.013%, the lowest point it has been so far and the second-lowest point in June. This was after seven days when it traded below the neutral level. Arcane Research attributed this decline in Bitcoin’s funding rate to an orderly sell-off in the derivative markets and the liquidation volumes on Monday and Tuesday. The liquidation volume reached above $1 billion in 24 hours, setting a new liquidation record. The research and analysis firm also noted that investors now approach the market with caution due to the contagion fear caused by market events surrounding Celsius.
Even though Bitcoin’s funding rates are low, its other metrics are not doing as bad. One of the metrics that stood its ground is the coin’s open interest. Bitcoin’s open interest in the perpetual market remains high even though the price reached a low close to its low in 2017. Historically, BTC-denominated open interest is known to decline with the market meltdown. However, this has not been the case in this recent market downturn. Instead of dropping, the coin’s open interest has surprisingly hit multiple new highs, even as the sell-off continues.
This means that some investors believed that bitcoin had bottomed in and looked to take advantage, but that wasn’t the case. Although open interest was at 298,500 BTC as of Tuesday, it is a broad contrast to the 190,000 BTC recorded during the market crash back in December. This high open interest means that Bitcoin will soon bottom out. However, this metric may not be enough to reach this conclusion.
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