Bitcoin‘s OI-weighted perpetual futures funding rate has hit a multi-month high at 0.012%, suggesting short to medium-term bullish sentiment.
According to an analyst, the bitcoin open interest (OI) weighted perpetual futures funding rate has recently reached a multi-month high, suggesting that there may be a favorable sentiment in the short to medium term.
The current OI-weighted funding rate is 0.012%, which has not been observed since July 27, when Bitcoin surged to $68,000. Nevertheless, the most significant 22% price correction occurred in the largest digital asset by market capitalization at the beginning of August, following the purging of the highly leveraged market.
Ruslan Lienkha, the Chief of Markets at YouHodler, clarified that a positive funding rate typically indicates favorable market conditions; however, it should be interpreted cautiously.
“A local peak in the positive funding rate may indicate a bullish trend in the short to medium term, but it should not be employed to make long-term predictions due to the volatile nature of the crypto market,” Lienkha stated to The Block.
Lienkha posits that funding rates in conventional markets, such as commodities, frequently represent long-term trends due to their association with the real economy, which functions at a slower tempo. Nevertheless, the analyst from YouHodler emphasized that the crypto market exhibits a distinct behavior.
“Crypto lacks a direct connection to actual economic processes, allowing market sentiment to shift much faster,” he said. As a result, funding rates in crypto markets are more prone to fluctuation, making them a less reliable long-term indicator compared to other asset classes, he added.
Funding rates are increasing in response to the rise in liquidations.
The funding rate has increased in response to the increased market volatility, which has resulted in substantial liquidations.
According to Coinglass data, over the past 24 hours, over $93 million in bitcoin positions were liquidated, with $83 million being short. This suggests an increase in bullish wagers, as traders who held short positions were compelled to liquidate them in response to the Bitcoin price recovery.
The broader cryptocurrency market experienced over $240 million in liquidations in the same period. Ether, the second-largest cryptocurrency, accounted for $50 million in liquidations, with $43 million in short positions.
Bitcoin has surpassed its 200-day moving average and risen 6% in the past few hours, surpassing the $65,000 mark after consolidation over the weekend.
Traders are closely monitoring this breakout, particularly in light of the numerous unsuccessful attempts to breach this critical level in recent months, according to Ryan Lee, Chief Analyst at Bitget. The current emphasis is on the potential for Bitcoin to maintain this upward trajectory or experience another decline.
Lee elaborated on the factors that have contributed to the optimism present in the context of bitcoin’s recent price movement. “Bitcoin’s breakout above $65,000 is significant, especially given recent coin accumulation and renewed optimism around the U.S. presidential election,” according to The Block.
Favorable Inflationary Data Stimulate market sentiment
The positive inflation data from the U.S. Producer Price Index (PPI) also coincides with the rally in cryptocurrency markets. The PPI’s reading of 0% on Friday, which was lower than the positive 0.1% forecast, suggests that inflationary pressures are subsiding.
The Core CPI, which excludes volatile commodities such as food and energy, also failed to meet expectations, with a reading of 0.1% compared to the anticipated 0.2%. Investor sentiment in speculative assets, such as cryptocurrencies, was enhanced by the 1.8% year-over-year PPI rate.
Lee observed that optimistic inflation data could act as a catalyst for additional upward momentum in bitcoin.
“The previous CPI release had exacerbated inflation concerns, which were alleviated by the PPI report.” Lee stated that this has contributed to the current rally in bitcoin and may facilitate a year-end surge.
Lee anticipates that bitcoin will fluctuate between $50,000 and $80,000 by the end of the year, with the potential for more significant fluctuations in the first quarter of 2025.
“If key economic indicators remain favorable and bitcoin breaks past its current resistance levels, we could see further upward acceleration, especially as various market catalysts come into play,” he said.
