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Bitcoin funding rates over the past two months have entered one of their worst streaks to date. During this time there were no positive funding rates, and the best the market has seen is funding rates at a neutral level. But even now, reaching neutral levels has proved incredibly difficult for funding rates, taking a deeper dive each week.
Financing rates remain below neutral
The last time bitcoin funding rates were in neutral territory was in early August. Since then, funding rates have consistently returned below neutral, recording some short-term lows along the way. Funding rates on crypto exchange Binance have actually fallen to their 2-month low right now. In addition, the crypto exchange has now reached nine months of funding rates at or below neutral levels.
This places the perpetual swaps at a continuously lower price compared to spot market prices. Since then, Bitcoin traders have reduced their risk exposure to the digital asset, and this is the culmination of such caution.
Funding rates remain below neutral | Source: Arcane Research
It is the most bearish the market has been since the bull market was activated in 2020. This comes even despite the fact that bitcoin open interest has seen higher levels. On Tuesday, bitcoin funding rates were around 0.00% and had hit a 2-month low earlier in the week.
Bitcoin open interest growing
Bitcoin open interest has maintained a consistent growth rate, despite funding rates taking a nosedive at every possible point. Each week, open interest has hit or nearly reached a new record. The first happened last week.
BTC trading below $20,000 | Source: BTCUSD on TradingView.com
This time, open interest hit a brand new all-time high of 398,075 BTC on August 29. This is more than 2% of the total circulating BTC supply. It is up significantly from last year’s low of 186,158 BTC, representing growth of over 110% over this time.
With open interest so high and financing rates so low, it leaves room for the possibility of a short squeeze. This unusual market has not been ignored by investors, leading them to take more conservative positions.
The price of Bitcoin is also not encouraging. After hitting a new local high of $25,000 about a week ago, the digital asset is now struggling to stay above $20,000.
Featured image from RushRadar, charts from Arcane Research and TradingView.com
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