As is well known, funding rates are the periodic payments made to either short or long traders. These are the primary forces used to maintain the balance between perpetual contract prices and the underlying crypto asset spot price.
In a bearish market, funding rates are negative, indicating that dominant short traders are paying to long traders.While funding rates suggested that prices would fall, the Open Interest revealed a new set of interesting findings. Bitcoin climbed to $26,260 in the last 24 hours of trading. This led to a spurt in the new positions getting opened. The increase in price complemented by a rise in the OI pointed towards new money coming into the market. Experts typically take this as a bullish signal.
However, the excitement evaporated quickly as BTC retreated back to $26,000 by 11:00 pm ET. As a result, the OI also fell.A larger picture, though, revealed that price and OI have fallen in lockstep since the crash on 17 August. This could be construed as a bullish signal as a downtrend would end once all long-position holders finish liquidating their holdings.The Long/Short Ratio chart narrated a similar story. Bets for BTC’s price gains outpaced those for price losses temporarily.
In the absence of new developments around the same, Bitcoin may once again be trapped in a narrow trading range.