- Bitcoin funding rates on DyDx and Deribit have turned positive.
- A “flat” open interest for this coin indicates that market participants are unsure of its short-term price direction.
Bitcoin's [BTC] In a post on X (formerly Twitter), Santiment noted that the temporary rise above $63,000 led to a spike in funding rates on derivatives exchanges such as DyDx and Deribit.
📊 #bitcoinFunding rates on exchanges like . #DyDx and #Delibit. To avoid history repeating itself after last week's top, #strong upon #cipher I want to see $BTC #FOMO stay low, #shorts Open at the same (or higher) rate as long. https://t.co/xlipAPHZPL pic.twitter.com/oD2qglaWvb
— Santiment (@santimentfeed) May 13, 2024
As of May 13, the BTC funding rate on DyDx and Deribit was 0.0012% and 0.037%, respectively, according to on-chain data providers.
These have continued to rise even though the coin’s price has retraced slightly from the $63,000 level over the past few days. At the time of writing, BTC was trading at $61,928. CoinMarketCap data.
Funding rates are used in perpetual futures contracts to ensure that the contract price remains close to the spot price.
When an asset's forward funding rate shows a positive increase, it indicates strong demand for long positions. This is considered a bullish signal and a harbinger of continued price appreciation for the asset.
Conversely, a negative funding rate suggests that short positions are in high demand. This is a bearish signal indicating that market participants are betting on the price of the asset.
Not all BTC traders are convinced
Although funding rates have increased, BTC futures open interest has fluctuated between $29 billion and $30 billion since early May, according to Coinglass data.
An asset's futures open interest measures the total amount of futures contracts that have not yet been settled.
When fluctuations occur within such a narrow range, traders do not actively add to or exit positions. This often occurs when market volatility is low.
An evaluation of BTC's volatility markers on the daily chart confirmed this.
For example, the coin's Average True Range (ATR), which measures market volatility by calculating the average range of highs and lows over a specified period of time, has been trending downward since April 19th.
This decrease in the ATR of an asset suggests that the likelihood of price fluctuations is decreasing. At the time of writing, BTC's ATR was 2618.68.
Source: BTC/USDT on TradingView
The reason BTC's open interest is “flat” could be because traders did not have strong conviction about its short-term direction.
read bitcoin [BTC] Price prediction for 2024-2025
However, with a brief rise above $63,000 a few days ago and subsequent increases in funding rates, the market is regaining confidence.
The futures open interest for this coin is expected to surge as more traders take long positions.
