K33 Report: Bitcoin Set to Bottom as Perpetual Funding Rates Turn Negative
Summary
K33 analysts indicate that negative funding rates in the perpetual swaps market signify a potential bottom for Bitcoin, historically leading to a bullish rebound of 79% on average over the next 90 days. With macroeconomic uncertainties looming and significant outflows from exchanges occurring, the current market conditions may be ripe for a price increase.
According to K33 analysts, the ongoing bearish sentiment within the perpetual swaps market has led to negative funding rates for Bitcoin, indicative of a potential market bottom. Historical data demonstrates that when 30-day average funding rates turn negative, Bitcoin typically experiences an average return of 79% over the subsequent 90-day period. Although uncertainty in macroeconomic factors continues to exert pressure on cryptocurrency and traditional markets, the negative funding rates suggest that the market may be nearing a trough. Recent correlations between Bitcoin and the S&P 500 have reached a 23-month peak, suggesting that Bitcoin’s price movement will significantly respond to economic indicators such as the Consumer Price Index (CPI) release and the Federal Reserve’s impending interest rate decision on September 18. The current funding rates are at their lowest since March 2023, marking the seventh occasion since 2018 where rates have dipped into negative territory. This situation often precedes a bullish turnaround in Bitcoin’s pricing. K33 Research posits that the likelihood of a positive market reaction in the following months is heightened by the considerable rise in open interest alongside the negative funding rates, supporting the anticipation of a short squeeze in the market. Furthermore, increased Bitcoin accumulation is evidenced by the largest net outflow from exchanges since May, totaling $750 million. Despite recent fluctuations, Bitcoin’s year-to-date performance shows a notable increase of 34.2%.
The perpetual swaps market allows traders to speculate on the price of Bitcoin without needing to buy the underlying asset directly. Funding rates are a critical metric in this market, representing the cost of holding a position and often reflecting market sentiment. When these rates go negative, it suggests that more traders are betting against the asset’s price, which can indicate an oversold condition. Historical patterns suggest that negative funding rates are frequently associated with price rebounds, making them an important signal for investors. Analysts also consider macroeconomic indicators and trends in traditional finance, as these can influence cryptocurrency markets significantly.
In conclusion, the persistent negative funding rates in the perpetual swaps market, coupled with increased market pressure and accumulation signals, suggest that Bitcoin may be on the verge of a bottoming out. Historical data supports the notion that negative funding rates precede significant price recoveries. As we approach pivotal economic announcements, market participants will be watching closely for signs of a potential turnaround in Bitcoin prices.
Original Source: www.theblock.co
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