A look at Bitcoin’s rally to $63,000 and its effect on market demand

• Bitcoin funding rates on DyDx and Deribit have turned positive.
• The coin’s “flat” open interest signals that market participants are unsure of the near-term price direction.

That of Bitcoin [BTC] The brief rally above $63,000 led to a spike in funding rates on derivatives exchanges like DyDx and Deribit, Santiment noted in a post on X (formerly Twitter).

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According to the on-chain data provider, as of May 13, BTC funding rates on DyDx and Deribit were 0.0012% and 0.037%, respectively.

These continued to rise despite the slight retracement of the coin’s price from the $63,000 level in recent days. At the time of writing, BTC was trading at $61,928 CoinMarketCap data.

Financing rates are used in perpetual futures contracts to ensure that the contract price remains close to the spot price.

When an asset’s futures funding rate sees a positive increase, it suggests strong demand for long positions. It is considered a bullish signal and a harbinger of continued price growth of an asset.

Conversely, negative funding rates suggest strong demand for short positions. This is a bearish signal that shows market participants are betting against the price of an asset.

Not all BTC traders are convinced of this

While its funding rates have risen, BTC Futures Open Interest has hovered between $29 billion and $30 billion since the start of May, according to Coinglass’ data.

An asset’s Futures Open Interest measures the total value of its futures contracts that have not yet settled.

When it swings in a tight range like this, traders do not aggressively add to or exit their positions. This often happens during periods of low market volatility.

An evaluation of BTC volatility indicators on a daily chart confirmed this.

For example, the coin’s Average True Range (ATR), which measures market volatility by calculating the average range between high and low prices over a set number of periods, has been in a downward trend since April 19.

When an asset’s ATR decreases in this way, it suggests that the probability of price movements is decreasing. At the time of this writing, BTC’s ATR was 2618.68.

Source: BTC/USDT on TradingView

BTC’s “flat” open interest could be due to traders’ lack of strong conviction regarding its near-term direction.

Light That of Bitcoin [BTC] Price forecast 2024-25

However, with the temporary rally above $63,000 a few days ago and the subsequent increase in borrowing rates, the market is regaining confidence.

As more and more traders take long positions, the coin’s Futures Open Interest is expected to increase.

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