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Bitcoin funding rates have been less than encouraging even when the digital asset was on an uptrend. This indicated that perp traders were not actually feeling the market or the recent recovery enough to do anything. Leading to less money flowing into the market. This was the case last week and it seems this has carried on into the previous week given that the funding rates have refused to budge, idling below neutral for the most part.
Bitcoin Traders Not Convinced
Funding rates on crypto exchanges Binance and Bybit have remained neutral or below neutral for the longest time, last week was no exception. This comes despite the price increase in the digital asset, which had been able to break above $47,000 for the first time in three months. Bitcoin funding rates did not react in any meaningful way to this. Apparently, these funding rates have now normalized in the neutral territory and remain comfortable at this point.
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The funding rates have not been the only aspect that has felt the effect of dwindling enthusiasm as open interest also took a hit in this regard. However, rather than remaining neutral, the bitcoin perpetual has marked a substantial decline. It had touched as high as 256,000 BTC on March 24th, but by April 4th, this number had declined to as low as 236,000 BTC. This suggests that traders in the space are deleveraging at this time.
BTC funding rates remain neutral | Source: Arcane Research
In the same vein, the neutral to below neutral funding rates are suggesting that long and short positions remain balanced. This shows that bitcoin traders are not looking favorably towards either long or short positions and continue to play their hands safe at this point.
This will mark the 122nd consecutive that the funding rates have remained neutral or below neutral on both the Binance and Bybit exchanges. Perp traders remain cautious at this point, meaning that there have been no positive funding rates in over three months.
Basis Premium Declines
It looks like last week was a week of little to no momentum as the CME was not left out of the declining trend. Last Thursday, the EU had voted to impose KYC on private wallets and the CME had reacted negatively to this. This caused a decline in its basis premium.
BTC falls to $43K | Source: BTCUSD on TradingView.com
However, the basis premium continues to be at a stable point on offshore exchanges. Both Binance and FTX crypto exchanges saw their basis continue to wax stable at around the 5% to 6% points in this same time period, while the CME declined to 4.52%.
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One cause of this could be the BITO ETF. This ETF had also recorded a week of low momentum and had in fact recorded outflows for the past week. Given this, it could have been a contributing factor to the declining basis premium on the CME.
Featured image from IG, charts from Arcane Research and TradingView.com
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