Bitcoin has seen volatile sentiments lately. With so many bears and recoveries, it’s no wonder investors are having trouble deciding which side of the fence to sit on. However, while retail investors seem uncertain about the market, last week there was some growth in the amount of funds and open interest, which may stabilize the positive sentiment.
Recovery of funding rates
Over the past two weeks, Bitcoin funding rates have been consistently below neutral. This coincided with a period when the market was struggling, bringing about a new bear trend. But with the events of the past week, there has been a remarkable recovery in finance rates.
Late last week, the currency returned to neutral levels for the first time in a month. Bitcoin price followed a recovery before sliding lower last Friday. Bitcoin funding rates lost their footing in neutral territory but continued to hold higher levels before recovering from BTC on Friday.
Funding rates return to neutral | Source: Arcane Research
This shows that there is still demand for both Bitcoin longs and shorts. This means that although it seems to be swinging in favor of the bulls due to the high levels, it is still an uncertain market. Additionally, last week’s rebound to neutral levels did little to change the current trend, as funding rates have now spent nine consecutive months at or below neutral levels.
Bitcoin’s open demand is called a ‘short squeeze’
Although the price of Bitcoin has fallen, open interest has not had a difficult time like other markets. Instead, BTC-token open demand has hit several new highs this year, leading to various short squeezes in the market.
Open demand continues to see favorable market conditions as it hit a new high of 421,000 BTC last Wednesday. Earlier this week, it peaked at 418,000 BTC and the short squeeze recorded on Friday did little to bring open demand.
The depressed market sentiment shows that this upward trend cannot be sustained for long. As higher open interest coincides with periods of price recovery, Bitcoin’s price decline also reflects this. It also means that bears dominate the market when open interest is high. Bitcoin falling below $20,000 is an indication that short traders are dominating the market.
Featured image from PYMNTS, charts from Arcane Research and TradingView.com
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