After hitting a local low of $ 43,000 on February 28, Bitcoin (BTC) price rose 28% to hit the $ 57,000 level on March 10, while futures contracts hit an all-time high of 20, $ 3 billion.
This time around, as Bitcoin surged to $ 57,000, there doesn’t seem to be any signs of retailing FOMO (fear of missing out) buying, at least from a futures and volume indicator standpoint.
While the refinancing rate stabilized at neutral levels, spot volumes stagnated, indicating that recent growth in open positions in futures is healthy.
As shown above, the open interest for BTC futures has risen to a new all-time high of $ 20.3 billion. This event is usually perceived as bullish, although longs and shorts match at all times. However, a yellow flag should be hoisted whenever an increase in this metric is followed by a high financing rate for perpetual futures.
The funding rate is neutral for n
Perpetual futures are the preferred instrument for leverage retailers because of their liquidity and hassle-free expiration date.
To ensure a balanced risk, the futures exchanges charge a fee for perpetual futures longs (buyers) or shorts (sellers) every eight hours. Known as the Funding Rate, this indicator turns positive when long positions require more leverage.
Insufficient margin longs are usually liquidated as their positions are forcibly closed. Therefore, excessive leverage is the main catalyst for significant price corrections.
As shown above, by the end of February, the 8-hour charge hit 0.20%, which is 19.7% per month. This rate is quite costly for those who have long bet on perpetual futures, but the effect disappeared when Bitcoin price fell below $ 48,000 on February 22nd.
On the other hand, the current funding rate of 0.05% per 8 hours is standard and expected in healthy markets. This indicator corresponds to a monthly fee of 4.6% and should not be a problem for leveraged longs.
The spot exchange volume did not increase
Had the retail FOMO prevailed as Bitcoin neared its all-time high of $ 58,300, the spot exchange volume would have been positively impacted.
As shown above, the most recent 5-day volume average of $ 8 billion is pretty flat compared to the past few weeks. As such, there is no evidence that retail investors are desperate to buy Spot BTC or Perpetual Futures contracts.
This data suggests that Bitcoin may see further price hikes as institutional clients continue to stack BTC heavily, regardless of the 70% gain since the start of the year.
While several analysts suggest that this activity would spark a quick buy among retail investors, there is currently no definitive evidence of this.
The Digital Currency Group’s decision to buy $ 250 million worth of Grayscale Bitcoin Trust shares is likely to bring some relief. This also applies to the imminent introduction of JPMorgan’s Crypto Exposure Basket.
These developments could be interpreted by retailers as the “seal of approval” of one of the largest banks in the world.
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