Bitcoin funding rates hit YTD lows, bearish trend looms: CryptoQuant

Bitcoin funding rates on Binance turn negative, reflecting a surge in short positions as institutional interest wanes.

Bitcoin funding rates on Binance, the largest global cryptocurrency exchange by trading volume, have plummeted to their lowest levels of the year, signaling a significant shift in market sentiment.

According to CryptoQuant onchain analyst EgyHash, the exchange’s Bitcoin (BTC) funding rates have remained negative for three consecutive days.

This bearish shift was last observed in October 2023 and indicates that short positions, bets that the BTC price will decline, have overtaken long positions.

Related: Bitcoin price bounces 4% as triple ‘death cross’ sparks sub-$50K warning

Funding rate shift implications

The funding rates on Binance have been used to measure market sentiment for some time, indicating a shift in traders’ sentiment based on short and long positions.

When funding rates turn negative in this manner, traders with short positions pay those with long positions, suggesting there is a higher or increasing demand for short positions.

According to EgyHash’s data, the current funding rates “have reached the highest level of negativity” year-to-date (YTD) as short positions dominate “the perpetual market.”

The average Bitcoin funding rate indicator, which compiles funding rates across all exchanges, has also turned negative — indicating a bearish shift “for the short term.”

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Bearish sentiment reinforced

An Aug. 16 10x Research report noted a lack of institutional interest in BTC, indicating that institutions “seem less inclined to pursue the market at current levels.”

The report assessed this institutional sentiment through the seven-day minting ratio, a stablecoin metric considered a clear indicator of BTC buyer activity.

Markus Thielen, founder of 10x Research, explained that stablecoin inflows are the “key sign” where fiat dollars are converted into crypto and moved into BTC or Ether (ETH). 

Related: Institutions not so interested in Bitcoin at $58K, metric shows

ETFs turn positive

On Aug. 15, spot BTC exchange-traded funds (ETFs) turned positive, with $11.11 million inflows recorded despite declining investors’ interest in Grayscale Bitcoin Trust (GBTC).

According to Sosovalue data, the total net asset value of spot Bitcoin ETFs reached $51.99 billion after combined net inflows of spot BTC ETFs hit $17.33 billion.

Although funding rates have turned negative, these ETF figures indicate an increased demand from institutional and retail investors eyeing BTC as a viable digital asset for crypto exposure. 

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