Bitcoin are “warming up again”
On-chain data for funding rates shows traders are once again piling into Bitcoin, the world’s largest cryptocurrency by market cap.
Funding rates are an indicator of increased trading activity. Perpetual swap products allow traders to borrow in excess of the funds they hold – a process called using leverage – to place bigger bets for more gains while putting up a smaller amount of capital at risk.
The excess funds are provided by the exchanges, which in turn charge interest from traders for allowing them to do so. High, positive funding rates mean traders are ready to pay high amounts as interest to place bets, while negative rates mean exchanges are ready to pay the trader borrowing from them.
Funding rates of perpetual futures products – financial instruments that track Bitcoin or other cryptocurrencies and don’t have an “expiry” date – were reaching levels last seen in mid-February, right before Bitcoin started its run to set an all-high time of over $58,500.
The rates are averaging around 0.06% at press time, or levels last seen on February 22, when Bitcoin started dumping after its ATH. They reached as high as over 0.14% on February 8, corrected to under 0.05% by February 10, before hovering in the 0.06–0.12% range for the next week at the time.
While the rates are suggesting surging price action ahead, a partner at a Hong Kong-based trading firm says a large dip could still occur.
Annabelle Huang, a partner at the Amber Group, said in a statement to CryptoSlate that while Bitcoin seems to be consolidating over $50,000, the $40,000 price level was favorable in case of a market correction.
“We note that 40–43k have been favorite levels to buy the near-term dip. BTC reclaimed the 50k level after the US passed the stimulus bill, and on the back of MicroStrategy and Meitu purchasing BTC,”
Huang stated that there was a recent increase in interest levels from institutional players globally, while in China, a lot of high-network-individuals were additionally inquiring about how to add Bitcoin to their portfolio.
Even Chinese businesses are betting big. Meitu, a Hong Kong-listed photo editing app, said last week that it picked up over $17 million in Bitcoin and $22 million in Ethereum, becoming the first Chinese company to do so.