Quant Explains Bitcoin Funding Rates Pattern That Precedes Uptrends

Keshav Verma

2 years ago

3 mins read

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A quant has explained how a specific Bitcoin funding rates pattern has preceded uptrends in the asset’s price during recent months.

The Bitcoin 72-Hour MA Funding Rates Pattern That May Kick Off Uptrends

As explained by an analyst in a CryptoQuant post, the price has started rising recently whenever the metric has been near zero inside the negative zone. The “funding rate” is an indicator that measures the periodic fee that traders on the Bitcoin futures market are currently exchanging with each other.

When the value of this metric is negative, it means the short contract holders are currently paying a premium to the long holders in order to hold onto their positions. Such a trend suggests that bearish sentiment is more dominant in the market right now.

On the other hand, positive values of the indicator imply the longs are paying a fee to the shorts at the moment, and hence, the holders with a bullish mentality outweigh those with a bearish one.

Now, here is a chart that shows the trend in the 72-hour moving average (MA) Bitcoin funding rate over the last few months:

Looks like the 72-hour MA value of the metric has been positive in recent days | Source: CryptoQuant

As you can see in the above graph, the quant has marked the relevant portions of the trend for the 72-hour MA Bitcoin funding rates. It seems like there have been a few instances during the last few months where the indicator has just turned negative (that is, still near the zero mark) and the price of the cryptocurrency has followed up by catching some upwards momentum shortly after.

While the left and right instances in the chart had the metric coming back inside the positive zone not too long after forming this pattern, the middle occurrence saw it go much deeper inside the negative territory first, and it was only after the initial leg up in the price that the funding rate became positive again.

Based on this, it seems like a neutral to a negative value of the 72-hour MA Bitcoin funding has provided the proper ground for the price to rally during these last few months.

Recently, the indicator has had positive values, implying that the total number of long positions has been overwhelming that of the short positions. Though, in the last few days, the metric has been gradually going down.

Despite this drawdown, however, the 72-hour Bitcoin funding rate is still significantly above the zero line, meaning that if the pattern that has apparently held during the last few months has to form again, more bearish positions would need to be opened on the market to nudge the balance towards the negative zone.

BTC Price

At the time of writing, Bitcoin is trading around $28,600, down 6% in the last week.

The value of the asset seems to have sharply gone down in recent days | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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