Data shows that the Bitcoin perpetual futures market has recently experienced negative funding rates, indicating that bearish sentiment is dominant.
Bitcoin Perpetual Futures traders bet on the short direction
As highlighted by Glassnode analyst Chris Beamish in an X afterBitcoin perpetual futures funding rate has been negative lately. The “Funding Rate” here refers to an indicator that measures the amount of periodic fees that traders on the various centralized derivatives exchanges currently pay each other.
When the value of the measure is positive, it means that the long holders pay a premium to the short holders to hold their positions. Such a trend implies that a bullish sentiment is shared by the majority.
On the other hand, the fact that the indicator is below zero means that the shorts outweigh the longs and a bearish mentality is the dominant force in the perpetual futures market.
Here is the chart shared by Beamish showing the trend in the three-day moving average (MA) of the Bitcoin Funding Rate over the past few months:
As shown in the chart above, the 3-day MA of the Bitcoin Funding Rate was previously positive even as the cryptocurrency’s price experienced a bearish shift. This suggests that perpetual futures traders were trying to bet on a market reversal to a bullish trend.
So far in March, BTC has found some stability and made some recovery, but the chart shows that market expectations have now reversed, with shorts having the upper hand. This also did not change during BTC’s recent rally above $75,000.
In general, the stronger side of the market is more vulnerable to mass liquidations. So while long investors came under pressure during the downtrend, it could be short investors who are now at risk.
In other news, Glassnode has revealed in its latest weekly report how there is a supply gap between the $72,000 and $82,000 levels on the UTXO Realized Price Distribution (URPD).
The URPD tells us about the total amount of supply that last moved at the different price levels that Bitcoin has visited in its history. The chart shows that this indicator shows a gap near recent price levels, implying that there isn’t much supply there on a cost basis.
In general, supply walls above the spot price act as resistance levels when investors exit at breakeven levels for fear of price declines. While there isn’t much in the way of this on-chain resistance up to $82,000, BTC’s recent attempt to break through the range still ended in failure.
BTC price
Bitcoin has fallen back to the $70,400 level after the latest pullback.