The price of Bitcoin has made quite the recovery in the past few weeks, raising questions about the sustainability of this fresh bullish momentum. It remains to be seen whether the flagship cryptocurrency is setting a bull’s trap, or it is making a legitimate claim for a new all-time high price. However, the latest on-chain data suggests that the Bitcoin price might be at the beginning of a strong upward trend.
Is There A Correlation Between BTC Price And Binance Funding Rates?
In a Quicktake post on the CryptoQuant platform, on-chain analyst Burak Kesmeci examined how funding rates on Binance can be used to analyze Bitcoin’s price trajectory in the short term. For context, the “funding rate” metric measures the periodic fee exchanged between traders in the derivatives (perpetual futures) market.
A positive funding rate indicates that the long traders (investors with buy positions) are paying a fee to short traders (investors with sell positions). This trend of the periodic fee signals the prevalence of a bullish sentiment in the crypto market.
On the other hand, a low funding rate metric implies that investors with short positions are paying long traders in the derivatives market. This direction of funding rate suggests that the market is being dominated by the short sellers.
According to Kesmeci, an in-depth evaluation of Binance’s Bitcoin funding rates over the past 30 days shows a clear correlation with the short-term price movement. When funding rates turned positive, the price of BTC typically experienced notable increases in the short term.
Source: Crypt
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Author: Opeyemi Sule
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