Negative Funding Rates Indicate Possible Upsurge for Bitcoin: Insights from K33 Research

Cryptonews Economy John Brightwater September 12, 2024

Negative Funding Rates Indicate Possible Upsurge for Bitcoin: Insights from K33 Research

Summary
K33 Research suggests that the current negative funding rates in Bitcoin’s perpetual swaps market may signify a potential market bottom, historically leading to significant price surges. The analysts highlight past trends of 90-day average returns following such downturns and note rising open interest as a catalyst for future price increases, amidst external market influences that could further impact Bitcoin’s trajectory.

Recent analyses from K33 Research indicate that Bitcoin is currently facing significant challenges, with persistent bearish attitudes contributing to negative funding rates in the perpetual swaps market. This marks the first incidence of negative funding rates since March 2023, leading analysts such as Vetle Lunde and David Zimmerman to propose that these conditions might signify a potential market bottom. Historically, previous instances of negative funding rates, which arise when traders incur costs to maintain long positions, have often preceded substantial increases in Bitcoin’s price. The research highlights that following past downturns, Bitcoin has typically enjoyed impressive 90-day returns, averaging 79%, with median returns standing at 55%. Furthermore, the analysts hint at the possibility of a price surge as open interest in perpetual swaps approaches levels not seen since late July, potentially catalyzing short squeezes as those betting against Bitcoin may find themselves compelled to cover their positions. Alongside these on-chain dynamics, external factors such as the correlation between Bitcoin and the S&P 500 reaching a significant high, and events such as the Consumer Price Index (CPI) release and Federal Reserve meetings, are also seen as influencing Bitcoin’s trajectory. Additionally, prospects like a Federal Reserve pivot, the forthcoming U.S. presidential election, the FTX repayment processes, and the anticipated effects of Bitcoin’s supply halving contribute to a cautiously optimistic outlook for Bitcoin as the year progresses.

Negative funding rates are a critical indicator within the cryptocurrency trading landscape, particularly within perpetual swaps markets. These rates indicate the cost incurred by traders maintaining long positions when overall market sentiment is bearish. Historically, situations in which the 30-day average funding rates turn negative have suggested potential market recoveries in Bitcoin’s price. K33 Research, through its examination of such historical trends, posits that the current bearish sentiment and resultant negative rates may allow for an impending price surge, drawing upon past patterns that show strong performance quality following similar market conditions.

In summary, K33 Research provides a detailed analysis suggesting that Bitcoin’s current negative funding rates could indicate a market bottom and a forthcoming increase in price performance. Historically, such trends have coincided with substantial recoveries in Bitcoin’s valuation. Coupled with impending external economic influences and rising open interest in perpetual swaps, these indicators position Bitcoin for potential upward movement moving toward the end of 2024.

Original Source: bitcoinist.com