An analyst said that the weighted perpetual futures funding rate of Bitcoin's open interest (OI) has reached a high point in months, indicating that a bullish sentiment may exist in the short to medium term.
In the face of increased market volatility in the past 24 hours, Bitcoin liquidations exceeded $93 million, with the majority being short positions.
An analyst said that the weighted perpetual futures funding rate of Bitcoin's open interest (OI) has reached the highest level in months, indicating that a bullish sentiment may emerge in the short to medium term.
The current weighted funding rate is 0.012%, a level not seen since Bitcoin briefly spiked to $68,000 on July 27. However, after the high-leverage market was flushed out, the largest digital asset by market cap subsequently experienced a 22% sharp price correction in early August.
Ruslan Lienkha, market manager at YouHodler, explained that while a positive funding rate usually indicates a bullish market condition, it should be interpreted with caution.
"A local peak in the positive funding rate may signal a bullish trend in the short to medium term, but due to the volatility of the cryptocurrency market, it should not be used for long-term forecasting," Lienkha told The Block.
Lienkha said that the funding rates in traditional markets like commodities tend to reflect long-term trends because they are closely tied to the real economy, which moves at a slower pace. However, the YouHodler analyst noted that the performance of the cryptocurrency market is different.
"Cryptocurrencies lack a direct connection to real economic processes, leading to faster shifts in market sentiment," he said. As a result, cryptocurrency funding rates are more volatile and less reliable as long-term indicators compared to other asset classes, he added.
An analyst said that the Bitcoin futures funding rate has reached a multi-month high, indicating a bullish sentiment in the short to medium term.
Increased Liquidations Drove Up Funding Rates
As funding rates rose, market volatility increased, leading to a surge in liquidations. According to Coinglass data, over the past 24 hours, Bitcoin positions worth more than $93 million were liquidated, with $83 million being short positions. This suggests a surge in bullish bets, as traders holding short positions were forced to liquidate their positions as Bitcoin prices rebounded.
During the same period, the broader cryptocurrency market saw over $240 million in liquidations, with Ethereum, the second-largest cryptocurrency, accounting for $50 million in liquidations, with $43 million being short positions.
After a weekend consolidation, Bitcoin broke above the $65,000 level, rising 6% in the past few hours and surpassing the 200-day moving average. According to Bitget's chief analyst Ryan Lee, traders are closely watching this breakout, especially after several recent failed attempts to breach this key level. The focus now shifts to whether Bitcoin can maintain this upward momentum or face another correction.
Lee further elaborated on the factors driving the recent optimism in Bitcoin's price performance. He told The Block: "Bitcoin BTC +2.22% breaking above $65,000 is significant, especially considering the recent token accumulation and optimism around the US presidential election."
Bitcoin is attempting to sustain a breakout above its 200-day moving average. Image source: TradingView
Positive Inflation Data Boosts Market Sentiment
The rally in the cryptocurrency market also aligns with the positive inflation data from the US Producer Price Index (PPI). On Friday, PPI came in at 0% - lower than the expected 0.1% - indicating easing inflationary pressures. Core CPI (excluding volatile items like food and energy) also came in below expectations at 0.1%, compared to the expected 0.2%. The 1.8% year-over-year increase in PPI has boosted investor confidence in riskier assets like cryptocurrencies.
Lee pointed out that the positive inflation data could serve as a catalyst for further Bitcoin gains.
"The PPI report has alleviated concerns about inflation, which were exacerbated by the previous CPI report. This helps to support Bitcoin's current uptrend and could pave the way for a year-end surge," Lee said.
Looking ahead, Lee expects Bitcoin's trading price to be in the range of $50,000 to $80,000 by the end of the year, with the potential for greater volatility in the first quarter of 2025.
"If key economic indicators remain favorable and Bitcoin breaks above its current resistance levels, we may see further upside acceleration, especially with various market catalysts at play," he said.
