• Bitcoin prices are significantly lower than in late 2021, but the market sentiment is as positive as back then.
• Funding rates for bitcoin perpetual futures have jumped to the highest since December 2021, indicating renewed bullish sentiment.
• The higher the funding rate, the more excited traders are about price prospects and willing to pay a premium to keep their upside bets open.
Bitcoin Sentiment Most Bullish in 14 Months
The cost of holding a bullish long position in perpetual futures tied to bitcoin has soared to its highest level since late 2021, signaling renewed bullish sentiment by leverage traders. Perpetuals are trading above spot prices, with an annualized funding rate of 8.491% across major exchanges such as Binance. This marks the highest level seen since December 3rd, 2021 when one BTC was priced at $57,000 compared to today’s market rate of $23,400.
What Is A Funding Rate?
Funding rates are a mechanism that keeps the prices of bitcoin perpetual futures contracts in sync with the spot market price. When perpetuals trade above spot levels, holders of bullish long positions have to pay bearish shorts to keep their positions open – this is known as a ‘positive funding rate’. On the other hand, when perpetuals trade below spot levels shorts pay bulls – this is known as a ‘negative funding rate’. Analysts monitor these rates as an indicator for trader sentiment in markets – when it rises it suggests increased enthusiasm for further upside potential among investors and traders alike.
December CPI Signals Seller Exhaustion
The cryptocurrency picked up strong buying pressure after mid-December last year due to seller exhaustion signaled by U.S consumer price index (CPI) figures which fell 6.5%. Since then Bitcoin has surged over 40%, leading many analysts like Dessislava Laneva from Kaiko crypto data provider suggest that “there has been a clear shift in market sentiment” due to this increase in demand and excitement around further upside potential going forward.
Are Traders Really That Excited?
Market participants often look at other factors such as volatility or liquidity metrics alongside funding rates when trying to gauge investor enthusiasm for any particular asset or currency pair; so while its clear that some degree of optimism exists among traders surrounding BTC’s future performance it remains too soon tell just how far current sentiments will take us without taking into account other market conditions too.
Overall it seems that despite current BTC prices being much lower than during late 2021 there is still plenty of optimism among leverage traders regarding Bitcoin’s future prospects; this has been reflected through recent increases in funding rates across major exchanges signalling renewed confidence from investors and traders alike that further upside could be on the horizon.