Bitcoin [BTC] Price Dips to $9100, But Why is BitMEX Funding Rate Rising? Analyst Explains

By Nivesh Rustgi
Published February 26, 2020 Updated February 26, 2020
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Bitcoin [BTC] Price Dips to $9100, But Why is BitMEX Funding Rate Rising? Analyst Explains

By Nivesh Rustgi
Published February 26, 2020 Updated February 26, 2020

Bitcoin [BTC] price takes a complete u-turn from bullish sentiments after it breaks below $9,500. The low in Bitcoin early on 26th February is $909x.

BitMEX funding rate and Open Interest is one of the leading indicators of the futures market situation. As the price continues to dip, the funding rate is continually rising; It looks like the bulls are still at large.

However, the fact that the funding rate is higher below $9300 than it was above $9500 indicates trapped bulls.

btcusd 4-hour with funding rate
BTC/USD 4-Hour Chart on Bitstamp (TradingView)

While the funding rate on BitMEX earlier yesterday was around 0.03% daily, it rose to 0.05% later as price dipped. Moreover, the Open Interest continues to be above $950 million, signalling large trading interest.

Jacob Canfield, leading derivatives and crypto trader tweeted,

Funding is actually insane right now for #bitcoin. How do we drop 7% and funding spikes for longs. This shit is not bullish at all.

This means that price dropped and longs are paying MORE to hold their positions open. So people that are under water in their trade are paying a lot (up to .13% on Deribit and .05% on Bitmex).

Furthermore, if the price continues to dip with long traders trapped, it might lead to a long squeeze causing massive mayhem – The long orders will be forced to sell at market price.

Nevertheless, while the traders on Deribit and BitMEX seem to be under water, elite Huobi traders have been seen holding majority short positions since 15th February.

huobi trader positions
Huobi Elite Trader Positions (Bitcoin)

Technically, the invalidation of the $9100-$93000 support levels would break the bullish market structure with a new swing low.

Moreover, the 200-Day Moving Average is currently sitting at $8789, as BTC is testing the 50-Day MA for support at the moment. A break-down of the 200-DMA would reverse sentiments strongly towards the bears. However, a reclaim and hold above $9500 would be bullish.

btcusd four hour chart
BTC/USD 1-Day Chart on Bitstamp (TradingView)

Do you think reversal is around the corner or an eventual squeeze? Please share your views with us. 

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Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
Nivesh Rustgi
1181 Articles
Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com

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