Bitcoin Sees Bearish Funding Rate Amid FOMC Hike Odds, Will Relief Reversal Succeed?
Key Summary
Bitcoin's funding rate on Binance fell to -0.0073%, indicating a bearish bias, amidst rising interest rate hike odds and negative macroeconomic news. The Binance funding rate flashed a bearish bias, but is that all? Bitcoin's price has been experiencing a correction towards $80K, with a week ago's CPI data revealing a 3.7% year-on-year inflation rate, higher than market expectations. The recent news has led to a Bitcoin price slide to $80.3K, but the 24-hour growth in Open Interest has risen from -3.0% to 4.6%. This suggests that more market participants are willing to use leverage, increasing the risk for long positions if the price continues to fall. The article discusses the implications of the Binance funding rate and the potential for a relief reversal in Bitcoin's price.
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Market Context
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A week ago, the CME FedWatch Tool revealed a 17.7% probability of a 25bps interest rate hike during 28th October's FOMC meeting. At the time of writing, that probability had risen to 27.7%. Bitcoin's funding rates on Binance fell to -0.0073%, reported crypto analyst Darkfost. Negative funding rates revealed that a majority of market participants were positioned bearishly.
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Precedent & Market Context
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The last time this happened was in June, when Bitcoin's price was around $62K. Here, it's also worth noting that the analyst drew attention to the negative macroeconomic news that both the CPI and PPI data came in hot earlier this week. It contributed to the rising rate hike odds, with Bitcoin in the middle of a correction towards $80K too.
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Main Analysis
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News that inflation had accelerated to 3.7% year-on-year in September, up from 3.4% in August and higher than the 3.6% market expectations, led to a Bitcoin price slide to $80.3K. And yet, the 24-hour growth in Open Interest, denominated in BTC, rose from -3.0% to 4.6%. The analyst also found that across all exchanges, the funding rates had been slightly positive during the price drop. Rising OI during a price slide highlighted that more market participants were willing to use leverage. It also underlined the risk for long positions if the price continues to fall.
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Delta Growth Rate Analysis
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Now, while the funding rate was negative, showing a bearish bias, it is at moments when the market consensus seems to be one way that a trend reversal tends to happen. The Delta Growth Rate metric combines the market cap and realized cap growth to combine BTC's price accumulation and the accumulation of onchain value. Negative values show potential undervaluation and weaker speculative activity.
The metric has been negative all year. However, it has shown signs of improving in recent weeks, according to crypto intelligence platform Alphractal. It was not enough to signal a structural trend reversal, but it did point to improving market dynamics. It remains to be seen if Bitcoin's correction towards $80K is over and if buyers will step in to keep the momentum going.