Bitcoin funding rate flips negative after $48K retest — Was it a bear trap?

Bitcoin funding rate flips negative after $48K retest — Was it a bear trap?


As Bitcoin (BTC) lost the $52,000 support on April 22, the futures contracts funding rate entered negative terrain. This uncommon situation causes the shorts, investors betting on price downside, to pay fees every eight hours.

While the rate itself is mildly damaging, this situation creates incentives for arbitrage desks and market makers to buy perpetual contracts (inverse swaps) while simultaneously selling the future monthly contracts. The cheaper it is for long-term leverage, the higher the incentives for bulls to open positions, creating a perfect “bear trap.”

BTC-margined perpetual futures 8-hour funding rate. Source: Bybt

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The above chart shows how unusual a negative funding rate is, and typically it doesn’t last for long. As the recent April 18 data shows, this indicator should not be used to predict market bottoms, at least not in isolation.

Monthly futures contracts are better suited for longer-term strategies

Futures contracts tend to trade at a premium — at least they do in neutral-to-bullish markets u2014 and this happens for

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