Sit tight
4 min read

Sit tight

B21 Crypto. We help you stomach cryptoassets.

Cryptic ball: and don't short a dull market.

As anticipated last Friday, this was a very smooth weekend; except in England, of course. Bitcoin and the wider crypto market continues compressing sideways, testing the patience of (at least) millennial investors, and that's what matters. Why? With volatility fading like this - a typical summer phenomenon which we've been covering since April - it's good that bears haven't been able to short a boring market, as these dull times imply thin order books which are easier to crash.

So, while sentiment on Crypto Twitter and on chat groups remains divided, your correspondent is fairly confident the worse is behind us. Just take a look below at the aggregate funding rates for BTC contracts on perpetual futures. They have been, on average, consistently negative since May's dump. If price was also consistently falling, this would be bad news. But with the $30k support holding steady it seems that funding rates will turn positive once the holidays end!

Chart art: because futures are incentivising longs.

Futures exchanges provide a great glimpse into trading sentiment with funding rates.

Market musings: low trading volumes are normal in the summer.

Why is that? Funding rates help match the price of those leveraged casinos to that of spot exchanges, which deal the real orange coin. A positive rate means the price of the futures contract is higher than the price of the underlying bitcoin, and vice versa. So higher funding represents high interest from bulls in such markets, and it forces those who are long to pay a regular fee to the short sellers. Conversely, in bearish times we tend to see negative funding, a sign that shorts are piling up.

In that situation, those betting against bitcoin have to pay funding to those who are long. Typically, however, these funding rates are mildly positive, as most traders and speculative funds use futures, making them more popular than the spot market, and as few traders risk shorting bitcoin for a prolonged period of time. After a big crash, it's normal to see such bearish activity, as most bears are late to the party. But bears eventually get exhausted as they need to pay hefty funding fees to hold short positions for a long period of time.

That's why if the existing bears can't dump bitcoin further, we'll likely see the wider bullish trend resuming once more upbeat investors return to their trading desks. For now, a sudden move can happen anytime - which would likely entice some liquidations and fast price action in this low-volume environment (spot exchanges volume is down 73% since May). So be prepared for that and expect the FOMO to kick-in once people feel like they have been left in the sidelines!

Visual block: hash rate crashed but miners are accumulating.

Albeit this drop was due to the great mining exodus from China following the recent bans.
Keep following miners, it's great news that the mining dump to fund their exodus has ended.

Three things: and we have Ethereum's hard fork this August.

Tweet tip: anyway, here's one extra piece of hopium.

This is worldwide data. Go on Google Trends and explore your country!

Meme moment: you'll remember bitcoin at $33.3k, dearly.

To save us from the machines or from the aftermath of Euro 2020!

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Our newsletter offers opinions and insights from analysts in the cryptoasset space. It is not intended to be investment advice, and should not be treated as such. You must not rely on its information as an alternative to financial advice from a qualified professional. Without prejudice, we do not undertake or guarantee that its information is correct, complete or non-misleading; or that the use of guidance in the report will lead to any particular outcome or result.