Original article by Brian McGleenon
Source: Bitcoin futures funding rate hits multi-month high, signaling bullish sentiment
Original title: The Block
Compiled by: Koala, Mars Finance
Bitcoin open interest (OI)-weighted perpetual futures funding rates have reached multi-month highs, suggesting that short- to medium-term bullish sentiment may be in place, according to one analyst.
Amid heightened market volatility over the past 24 hours, Bitcoin liquidations totaled over $93 million, mostly in short positions.
Bitcoin open interest (OI)-weighted perpetual futures funding rates have reached their highest levels in months, suggesting a possible bullish sentiment in the short to medium term, according to one analyst.
The current OI-weighted funding rate is 0.012%, a level not seen since Bitcoin’s brief surge to $68,000 on July 27. However, the largest digital asset by market cap subsequently experienced a sharp 22% price correction in early August after the highly leveraged market was washed out.
Ruslan Lienkha, YouHodler’s head of markets, explained that while positive funding rates generally indicate bullish market conditions, they should be interpreted with caution.
“Localized peaks in positive funding rates may signal a bullish trend in the short to medium term, but should not be used for long-term predictions due to the volatility of the cryptocurrency market,” Lienkha told The Block.
Lienkha said that funding rates in traditional markets such as commodities tend to reflect long-term trends because they are closely tied to the real economy, which moves more slowly. However, YouHodler analysts noted that the cryptocurrency market behaves differently.
“The lack of direct connection between cryptocurrencies and real economic processes leads to faster shifts in market sentiment,” he said. As a result, funding rates in the cryptocurrency market are more volatile and less reliable as long-term indicators than other asset classes, he added.
Bitcoin futures funding rates have reached multi-month highs, indicating short- to medium-term bullish sentiment, according to one analyst.
Increased liquidations lead to higher funding rates
The increase in funding rates comes amid heightened market volatility, which has led to a large number of liquidations. According to Coinglass data, more than $93 million worth of Bitcoin positions were liquidated in the past 24 hours, of which $83 million were short positions. This indicates a surge in bullish bets as traders holding short positions were forced to liquidate their positions during the recovery in Bitcoin prices.
During the same period, the broader cryptocurrency market saw liquidations of more than $240 million, with the second-largest cryptocurrency, Ethereum, seeing $50 million in liquidations and $43 million in short positions.
After a weekend of consolidation, Bitcoin has broken through the $65,000 mark, rising 6% in the past few hours and surpassing the 200-day moving average. According to Bitget chief analyst Ryan Lee, traders are closely watching this breakout, especially after several recent attempts to break through this key level failed. The focus now shifts to whether Bitcoin can maintain this upward momentum or face another pullback.
Lee further elaborated on the factors that are encouraging optimism about Bitcoin’s recent price action. “Bitcoin BTC +2.22% breaking above $65,000 is significant, especially given recent accumulation of the coin and optimism surrounding the U.S. presidential election,” he told The Block.
Bitcoin is attempting to continue to break above its 200-day moving average. Image source: TradingView
Positive inflation data boosts market sentiment
The cryptocurrency market’s rally also coincided with positive inflation data from the U.S. Producer Price Index (PPI). On Friday, the PPI came in at 0% — below the forecast of 0.1% — suggesting some easing of inflationary pressures. The core CPI, which excludes volatile goods such as food and energy, also came in below expectations at 0.1%, compared to expectations of 0.2%. The year-over-year PPI gain of 1.8% has boosted investor sentiment toward riskier assets such as cryptocurrencies.
Lee noted that positive inflation data could be a catalyst for further gains for Bitcoin.
“The PPI report eased concerns about inflation, which were heightened by the previously released CPI report. This helps support Bitcoin’s current gains and could pave the way for a surge towards the end of the year,” Lee said.
Looking ahead, Lee expects Bitcoin to trade between $50,000 and $80,000 by the end of the year, with more volatility likely in the first quarter of 2025.
“If key economic indicators hold up well and Bitcoin breaks above current resistance, we could see further upside acceleration, especially if various market catalysts come into play,” he said.
