Bitcoin (BTC) Funding Rate Turns Negative for Third Consecutive Day at Levels Not Seen Since October 2023

Following the release of the US CPI inflation data, Bitcoin (BTC) price has come under some selling pressure tanking all the way under $57,000 earlier today.

Bitcoin (BTC) price dropped sharply on August 16 following the release of the US CPI inflation data, which showed a smaller-than-expected decline. As a result, BTC fell to as low as $56,800 before recovering to trade above $58,000 at press time.

This price volatility led to strong liquidations in the market, with both long and short liquidations combined reaching $76.06 million, according to data from Material Indicators. On the four-hour timeframe, the indicator showed a death cross pattern emerging on the Bitcoin chart, an event that could help the market establish long-term support.

“The good news is, one way or another this has the potential to help the market validate a bottom for Bitcoin…or possibly create a new one,” Material Indicators noted in its analysis.

Meanwhile, other market analysts are suggesting that there is potential for a deeper correction from the current levels, which could see BTC fall all the way to $45,000 before resuming its uptrend. This would take the market to a six-month low and to a rising trendline at around $45,000.

Bitcoin funding rate flashes warning signs

One key on-chain metric to watch is the Bitcoin funding rate, which has turned negative for the third consecutive day at levels not seen since October 2023. In its recent post, CryptoQuant noted:

“The average Bitcoin funding rate indicator that counts the funding rates on all exchanges is now also negative. This means that short positions are now dominating the perpetual market. Taking this into consideration, and as Binance has the largest share of open interest (OI), this could indicate a bearish market sentiment for the short term.”

Liquidation platform Coinglass also reported that the open interest (OI) for the Bitcoin futures reached $29 billion on August 16, and has been rising throughout the week. On the other hand, the spot BTC price has dropped around 5% over the last two days. Open Interest indicates the total number of Bitcoin futures that have yet to settle or expire.

The rising Open Interest shows huge leverage in the market that can amplify movements in either direction. “An increase in open interest means that both long and short positions are increasing,” the firm added.

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