Key Points
- Bitcoin’s funding rates on DyDx and Deribit are rising, indicating a strong demand for long positions.
- Bitcoin’s “flat” open interest suggests market participants are unsure about its short-term price direction.
Bitcoin’s [BTC] recent surge above the $63,000 mark resulted in an increase in its funding rates on derivatives exchanges such as DyDx and Deribit. This was noted by on-chain data provider, Santiment.
Funding Rates and Open Interest
As of May 13th, BTC’s funding rates on DyDx and Deribit stood at 0.0012% and 0.037% respectively. Despite a slight price retraction from the $63,000 level, these rates continued to rise. At the time of writing, BTC was trading at $61,928.
Funding rates are used in perpetual futures contracts to ensure the contract price stays close to the spot price. A positive surge in an asset’s futures funding rate indicates a strong demand for long positions, which is a bullish signal. On the other hand, negative funding rates suggest a high demand for short positions, indicating a bearish market sentiment.
Bitcoin’s Market Volatility
Despite the rise in funding rates, BTC’s futures open interest, which measures the total value of its futures contracts that are yet to be settled, has been oscillating between $29 billion and $30 billion since May’s start. This suggests that traders are neither aggressively adding nor exiting their positions, often a sign of low market volatility.
This was confirmed by BTC’s volatility markers on a daily chart. For instance, the coin’s Average True Range (ATR), which measures market volatility, has been on a downtrend since April 19th. A declining ATR suggests a lessening likelihood of price swings.
The “flat” open interest may be due to traders’ uncertainty about Bitcoin’s short-term direction. However, with the coin’s temporary rally above $63,000 and the subsequent surge in funding rates, the market seems to be regaining confidence. As more traders take long positions, Bitcoin’s futures open interest is expected to increase.
