Bitcoin Open Interest, Funding Rates Point To Growing Bullish Sentiment

Bitcoin has seen fluctuating sentiment recently. With many dips and recoveries, it’s no surprise that investors have had a hard time deciding which side of the fence to sit on. However, while retail investors appear to be uncertain about the market, there has been some growth in both the funding rates and the open interest over the last week, showing that positive sentiment may be stabilizing.

Finance Rates Recover

Over the past two weeks, bitcoin financing rates have been consistently below neutral. This coincided with the times when the market struggled, ushering in a new bearish trend. But with the events of the last week, there was a remarkable recovery in the financial rates.

At the end of last week, the financial rates returned to neutral levels for the first time in a month. It followed the recovery in the price of bitcoin last Friday before it slipped back down. The bitcoin financial rates have subsequently lost their footing at the neutral territory but continue to maintain higher levels ahead of BTC’s recovery on Friday.

Funding rates return to neutral | Source: Arcane Research

What this shows is that there is still demand for both bitcoin longs and shorts. This means that although it looks to be swinging in favor of the bulls due to the high levels, it is still an uncertain market. Additionally, last week’s recovery to neutral levels hasn’t really changed much about the current trend, as funds rates have now spent nine consecutive months at or below neutral levels.

Bitcoin Open Interest Say ‘Short Squeeze’

Despite the decline in the bitcoin price, the open interest did not have a difficult time like the rest of the market. Instead, BTC-denominated open interest hit several new all-time highs this year, leading to various short pressures in the market.

Open interest continued to see favorable market conditions as it hit a new all-time high of 421,000 BTC last Wednesday. Even the short squeeze that was recorded on Friday didn’t do much to lower the open interest, which remained elevated at 418,000 BTC earlier this week.

The depressed market sentiment suggests that this uptrend is unlikely to last very long. Bitcoin’s price decline also points to this, as the elevated open interest coincided with a period of price recovery. It also means that bears dominate the market during the period where the open interest was high. Bitcoin’s fall below $20,000 is a testament that short traders continue to control the market.

Featured image from PYMNTS, charts from Arcane Research and TradingView.com

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