Bitcoin funding rates had hit their one-year low earlier in the month following the crash of BTC. It has inevitably regained back some of its value but not without struggling first. The price of BTC in turn struggled as funding rates continue to trend low for the year. Funding rates have now begun to recover again, signaling what might be the beginnings of another bull rally.
Funding Rates Recover
Bitcoin’s funding rates have remained neutral since the December 4th crash that sent it towards one-year lows. However, this has begun to change as funding rates have turned upwards in the previous days. It has hit its highest points since its crash rising above December 6th points. Although this level is still much lower than average highs for the high, it signals that investors’ sentiment may be skewing back into the positive.
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Most of the recovery has come from funding rates on FTX and Deribit. These two platforms have contributed more than Binance and ByBit, whose funding rates have continued to trend in the neutral territory. With levels picking up on the former, it is expected that funding rates may actually begin to pick up on both Binance and ByBit exchanges as sentiment become more bullish.
Funding rates recover from crash | Source: Arcane Research
The funding rates remain a long way from levels recorded in October when bitcoin had reached its all-time high of $69K. Nevertheless, there has been a marked recovery in the rates as investors begin to find their way back into the market.
Bitcoin Perpetuals Open Interest On The Rise
Open interest in bitcoin perpetuals had also taken a nosedive in the crash on December 4th but has had a faster recovery trend compared to funding rates. While funding rates have stayed mostly neutral, open interest in bitcoin perpetuals has maintained an upward trend. It grew from a total of 186,000 BTC on December 5th to 226,000 on December 20th, as reported by Arcane Research.
Open interest in BTC perpetual recovers | Source: Arcane Research
Leverage has also been picking up in the market as open interest has grown. Binance has enjoyed most of this recovery as it has seen the most prominent growth in the weeks following the crash. The Binance USDT margined perpetual has seen open interest grow from 40,000 BTC since the crash to a current 62,000 BTC as of December 20th.
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Shorts have suffered the most from this growth as increased open interest in the stablecoin margined BTC perpetual saw underwater shorts liquidated in a short squeeze. All of this has continued to happen during a period of flat funding rates.
BTC trading north of $48K | Source: BTCUSD on TradingView.com
Featured image from The Guardian, charts from Arcane Research and TradingView.com