Bitcoin open interest (OI)-weighted perpetual futures funding rates have reached multi-month highs, suggesting possible bullish sentiment in the short to medium term, according to one analyst.

The current OI-weighted funding rate is 0.012%, the highest level since Bitcoin briefly surged to $68,000 on July 27. However, the largest digital asset by market capitalization subsequently saw a sharp price correction of 22% in early August after the highly leveraged market was washed away.

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YouHodler Head of Markets Ruslan Lienkha explained that while a positive funding rate generally indicates bullish market conditions, it should be interpreted with caution.

“A localized peak in the positive funding rate could signal a bullish trend in the short to medium term, but should not be relied upon for long-term predictions due to the volatility of the crypto market,” Lienkha told The Block.

According to Lienkha, funding rates in traditional markets such as commodities often reflect long-term trends because they are associated with the slower-moving real economy. However, YouHodler analysts noted that crypto markets behave differently.

“Cryptocurrencies lack a direct link to real economic processes, which allows market sentiment to change much more quickly,” he said. He added that as a result, funding rates in crypto markets are more volatile and are a less reliable long-term indicator than other asset classes.

Bitcoin futures funding rates have reached multi-month highs, indicating short- to medium-term bullish sentiment, according to one analyst.

Funding rates rise amid increased liquidations

The increase in funding rates comes amid heightened market volatility, leading 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 close their positions during the recovery in Bitcoin prices.

The broader cryptocurrency market saw more than $240 million in liquidations during the same period, with second-largest cryptocurrency Ether seeing $50 million in liquidations and $43 million in short positions.

After a period of consolidation over the weekend, Bitcoin has broken through the $65,000 mark, rising 6% in the past few hours and surpassing its 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 elaborated on the factors that are encouraging the optimism surrounding Bitcoin’s recent price action. “Bitcoin’s move above $65,000 is significant, especially given the recent accumulation of the coin and renewed optimism about the U.S. presidential election,” he told The Block.

Bitcoin is attempting to sustain a breakout above its 200-day moving average.

Positive inflation data boosts market sentiment

The cryptocurrency market rally also coincided with positive inflation data from the U.S. Producer Price Index (PPI). On Friday, the PPI was 0%, below the optimistic forecast of 0.1%, indicating some easing of inflationary pressures. The core CPI, which excludes volatile items such as food and energy, also came in below expectations at 0.1%, compared to expectations of 0.2%. The PPI year-on-year rate was 1.8%, boosting investor sentiment towards riskier assets such as cryptocurrencies.

Lee noted that positive inflation data could be a catalyst for further upward momentum for Bitcoin.

“The PPI report eased concerns about inflation, which had been heightened by the previous CPI release. This helped support Bitcoin’s current rally and could pave the way for a surge toward 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 greater volatility likely in the first quarter of 2025.

“If key economic indicators remain favorable and Bitcoin breaks above current resistance, we could see further acceleration upwards, especially if various market catalysts come into play,” he said.