The Bitcoin perpetual futures market is currently engulfed in a sea of pessimism, with funding rates languishing well below neutral for an extended period. This scenario mirrors the dire conditions witnessed during the significant price plunge in November 2022. According to K33 Research analyst Vetle Lunde, the current funding rate environment is the most depressed since Bitcoin’s 80% drawdown over a year ago.
“We’re in the deepest funding rate environment since Bitcoin’s 80% drawdown in November 2022,” Lunde remarked. Despite this bleak outlook, Lunde also observed that these bearish bets are becoming increasingly crowded, signaling a potential nearing of sell-side exhaustion. This sentiment echoes the analyst’s belief that we could be on the cusp of a market turnaround.
In this week’s K33 Research report, Lunde highlighted a concerning trend: the funding rate for Bitcoin perpetual futures has been consistently below neutral for over 30 days. This marks the longest stretch of such low rates since the 36-day period in May 2024. Although the May 2024 period saw negative funding rates for a more extended duration, the current rates are notably lower and have remained persistently negative for the past month.
Lunde further elaborated, “While the May streak lasted longer, annualized funding rates during that period averaged at 5.1%, substantially higher than the current regime. The average four-week funding rates now sit at negative levels for the first time since December 25, 2022.” Negative funding rates indicate that traders are predominantly betting on Bitcoin’s price decline, reflecting a broad market pessimism.
However, there’s a silver lining in this stormy cloud. According to Lunde, if historical patterns hold, September could present an opportune moment to buy the dip and position for a potential recovery in the fourth quarter. “Buying blood in September to build exposure for Q4 has historically been the best spot strategy,” he noted, suggesting that the current market conditions might set the stage for a rebound.
Indeed, Bitcoin’s price has shown some resilience, increasing by over 4% in the past 24 hours to trade at $56,462 as of 7:09 a.m. ET. Bitcoin’s dominance in the crypto market stands at 53.9%, with Ether holding a 13.9% share, according to CoinGecko data.
As Bitcoin navigates these turbulent waters, traders and investors might want to keep a close watch on market trends and consider Lunde’s insights when making strategic decisions. The current pessimism could very well pave the way for future opportunities, making it a critical time for savvy investors to assess their positions and prepare for potential gains in the coming months.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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