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The below is from a recent edition of the Deep Dive, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
Today we’ll cover the latest in the bitcoin derivatives market. At the time of writing, the price of bitcoin is up approximately 8% over the previous day’s time. When analyzing the derivatives data, the previous two months have brought about a regime of periodically negative funding, showing the caution shown by market participants during a period of macroeconomic uncertainty.
The bitcoin price weighted by the hourly perpetual funding rate demonstrates caution by market participants.
Shown below is the funding rates annualized, with approximately 10% annualized being the market neutral rate to go long. As we stand today, funding rate sentiment emphasizes a skewed, below-neutral sentiment to the downside since late January.
Funding rate sentiment emphasizes below-neutral feeling.
For additional context, here is the daily average of perpetual swap funding rates since the start of 2020:
The daily average bitcoin price weighted by perpetual funding rate offers more context for market sentiment.
It is noteworthy that previous regimes of derivative bearishness saw funding rates go much deeper into negative territory, which could speak to the maturation and institutionalization of the asset class.
Similarly, quarterly futures annualized basis continues to fall, while price notably caught a bid.
Quarterly bitcoin futures continue to fall.
Equities indices are also trading up by approximately 3% today, which is likely to have contributed to the positive price action seen in the bitcoin market.
As for the level of open interest in the derivatives market, it continues its downtrend since November in both BTC and USD terms. Open interest is down 14.76% and 44.34% respectively. With the falling annualized rolling basis, this is another way to view the structural decline of the risk appetite demand for bitcoin over the last five months.
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