When examining Binance's Funding Rates data over the past month on an hourly basis, the 0.04 level emerges as a critical threshold.
1. Why Binance?
There are several reasons why Binance’s data is the focus of this analysis. Currently, Binance leads the market with $34 billion in Open Interest (OI), significantly outpacing competitors:
Bybit: $25 billion
Bitget: $18 billion
This dominance highlights Binance’s crucial role in the derivatives market. Consequently, on-chain metrics like Binance Funding Rates are key indicators of market sentiment and behavior.
2. The Critical Threshold
A closer look at Binance's Funding Rates over the past month reveals the significance of the 0.04 level. On three separate occasions, exceeding this level was followed by notable corrections in Bitcoin’s price.
November 12, 2024: Bitcoin dropped by -5.38%.
November 18, 2024: Bitcoin declined by -3.13%.
December 5, 2024: Bitcoin fell sharply by -12.53%.
The primary reason behind these corrections was the increased cost of carrying long positions as Funding Rates rose. At such elevated levels, the market was forced to rebalance itself.
Conclusion
When Binance Funding Rates exceed the 0.04 threshold on an hourly basis, it indicates an overheated Bitcoin market in the short term. Historical data suggests that such situations often lead to potential corrections.
This metric serves as an important signal for managing short-term risks, identifying local peaks during bull rallies, and spotting buying opportunities after corrections.
Current Status
At present, Bitcoin has surpassed the $100,000.
However, Binance Funding Rates indicate a calm market environment, as the metric remains at 0.01 and has been stable for the past 48 hours. This stability suggests that the market is not currently experiencing excessive risk.
Written by burakkesmeci
