The Bitcoin funding rate and the 3-month annualized basis rates are reaching levels that suggest to traders that a big change might be on the way.
These are two important indicators used by Bitcoin traders. They could mean that the price of Bitcoin is likely to rise soon, as explained by a cryptocurrency analyst.
Bitcoin Indicators Point to Consolidation
Reflexivity Research co-founder Will Clemente suggested in a May 7 post on X that Bitcoin is currently in a phase of consolidation before its next significant upward movement. He noted that both Bitcoin’s funding rate and Basis rate have cooled off after briefly reaching negative readings.
Bitcoin’s funding rate dipped into negative territory on several occasions in April. Source: Will Clemente
The funding rate of Bitcoin is a key metric used to gauge overall trader sentiment in the cryptocurrency market. Exchanges utilize this rate to balance out traders entering long positions against those opting for short positions, thereby mitigating the risk of overexposure.
When traders holding long positions become more dominant, the funding rate turns positive, signaling their confidence in Bitcoin’s potential price increase. At the time of writing, the OI-weighted funding rate stands at 0.0091%, rebounding from a negative rate of -0.0050% recorded on May 4, according to data from CoinGlass.
Mixed Signals in Bitcoin Market
Pseudonymous crypto commentator Crypto Empire likened the current situation in the Bitcoin market to “the calm before the storm.” Similarly, another pseudonymous crypto trader, Mister Crypto, expressed bullish sentiment to their 98,000 X followers, citing the low Bitcoin funding rates amid price rebounds.
Although Bitcoin’s price saw a modest 1.11% increase to $62,361 over a four-day period, liquidation data presents a different picture. It suggests that futures traders remain bearish, anticipating a potential near-term price decline.
A significant price rise to $65,000 could liquidate $1.36 billion in short positions, whereas a drop to $60,500 would only wipe out $650 million in long positions, highlighting the current market dynamics.
Bitcoin 3 month annualized basis rate. Source: Will Clemente
Some traders observe that Bitcoin’s annualized basis rate has surged to the higher end of the 5-10% neutral range on major exchanges like Binance, OKX, and Deribit. The annualized basis rate reflects the cost difference between a Bitcoin futures contract and the actual Bitcoin price, with rates above 10% often interpreted as a neutral-to-bullish signal.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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