Trouble Ahead? Binance Coin Futures Market Under Pressure With Negative Funding Rates
April 04 2024 - 10:00AM
NEWSBTC
The outlook for Binance Coin (BNB) has turned cloudy, with both
futures market data and technical indicators flashing bearish
signals. Based on our analysis of Coinglass data, negative funding
rates and declining open interest in BNB futures contracts paint a
picture of growing pessimism among traders. Related Reading: XRP
Battle Cry: Must Rally 70% To Reconquer $1 Peak After Market
Turmoil A negative funding rate suggests that more traders are
holding short positions, anticipating a decline in the price of the
asset. This sentiment was confirmed on April 1st, when BNB’s
funding rate dipped into negative territory at -0.012%. Binance
Coin Funding Rate And Open Interest Down Further fueling the
bearish narrative, BNB’s futures open interest has also witnessed a
slight decline of 0.15%. Open interest reflects the total amount of
outstanding futures contracts that haven’t been settled yet. A
decrease in open interest suggests traders are exiting their
positions without opening new ones, potentially signaling waning
confidence in the market. Source: Coinglass Funding rates are a
crucial mechanism in perpetual futures contracts that keep the
contract price aligned with the spot price. When the contract price
trades higher than the spot price, long position holders pay a fee
to shorts, resulting in positive funding rates. Conversely,
negative funding rates materialize when the contract price dips
below the spot price, indicating that short sellers are currently
paying fees to longs. Source: Coinglass More Traders Close Their
Positions As negative sentiments mount, this open interest is
expected to plummet further. This would imply that more traders are
closing their positions and not opening new ones, suggesting a
potential price drop for BNB. The bearish sentiment isn’t confined
to the futures market. The Moving Average Convergence
Divergence (MACD), another technical indicator, is suggesting a
possible resurgence in selling pressure. There’s an indication that
the MACD line might cross below the signal line, typically
interpreted as a bearish sign signaling the return of sellers to
the market. It’s noteworthy that since March 18th, the MACD lines
for BNB have been positioned for a downtrend. BNB market cap
currently at $87.9 billion. Chart: TradingView.com BNB Price
Retreat In The Offing? Considering both the futures market and
technical analysis, there’s a potential for a short-term decline in
BNB’s price. However, it’s important to acknowledge that market
sentiment can shift rapidly, and technical indicators aren’t
infallible predictors of future price movements. At the time of
writing, BNB was trading at $587, up 6% in the last 24 hours, data
from CoinMarketCap shows. Related Reading: Fear Grips XRP Market As
Liquidations Top $6 Million – Details Meanwhile, a closer look at
BNB’s technical indicators on the 24-hour chart reveals another
trend. The Directional Movement Index (DMI), used to gauge trend
strength, displayed a bearish crossover where the negative
directional index sits above the positive directional index. This
positioning suggests that bearish momentum is currently dominating
the market. Analysts commonly interpret this particular crossover
as an imperative signal prompting traders to consider exiting long
positions and initiating short positions. This strategic move
aligns with the prevailing trend indicated by the DMI, reinforcing
the notion of a prevailing bearish sentiment within the market
ecosystem. Featured image from Pexels, chart from TradingView
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