According to on-chain data, Bitcoin funding charges have stayed essentially negative for more than a week. If past trends are any indication, a backside could be on the horizon.
As shown in a CryptoQuant article by an analyst, Bitcoin funding charges have been declining for the majority of this week.
The term “funding charges” refers to the price that Bitcoin future traders must pay each other on a regular basis in order to keep their positions open.
When the value of this indicator is positive, it indicates that long investors are currently in control and are paying a premium to short sellers. When the market attitude is overwhelmingly bullish, such levels occur.
Shorts now outnumber longs and are willing to pay a price to the longs, according to unfavorable funding charges. This type of trend could indicate that practically all merchant mood is pessimistic in the interim.
Now, here’s a graph that shows how the BTC funding charges have changed since April of last year:
The Bitcoin funding charges have been generally negative for greater than a week now, as you can see in the graph above.
These figures suggest that the vast majority of futures traders are currently bearish.
The last time such negative investment rates held for longer than this was during the mini-bear market between May and July 2021, as shown in the graphic. A backside formation formed during this interval.
As a result, the quant in the article speculates that the current negative funding charges would be ideal for reversing the trend.
BITCOIN VALUE
Bitcoin’s value is hovering around $37.3k at the time of writing, up 11% in the last seven days. The digital currency has lost 20% of its value in the last month.
The graph below shows how BTC’s value has changed over the previous five days.
Bitcoin’s value peaked at $38.6k a few days ago before plummeting to its current levels. In the meantime, it’s uncertain whether the coin’s value will improve, but if funding costs are taken into account, a bottom could form in the current situation.
However, it’s worth remembering that the bottom formation took an extra three months of negative funding costs during the May-July consolidation.