Binance Coin (BNB) Falls as Funding Rates Turn Negative, Signaling Bearish Market Sentiment

According to Cryptoquant, funding rates of Binance have turned negative again. Here, a negative trend in funding rates on Binance usually leads to considerable market movements.

Cryptoquant has observed a renewed trend in Binance’s funding rates turning negative once again. Historically, such an occurrence has been linked to significant market movements.

According to the on-chain analytics platform, this marks the third time in 2023 that Binance’s funding rates have entered negative territory for an extended period. As per Cryptoquant’s analysis, this pattern has garnered the attention of traders due to its implications.

“Binance Funding Rates Turning Negative. Might be interesting to keep an eye on.”

As a quick refresher, funding rates serve as periodical payments between short and long-term traders, based on the market difference between perpetual contracts and spot prices.

When funding rates are positive, traders holding long positions pay those in short positions. This indicates a bullish market sentiment, with investors willing to pay a premium to maintain their long positions.

Conversely, negative funding rates indicate that traders in short positions are paying those holding long positions, suggesting a market correction or bearish sentiment.

Highlighting this, Cryptoquant’s analysis adds,

“When Binance funding rates turn sharply positive (suggesting bullishness), it usually precedes a market top.”

Surging demand for short positions

The on-chain analytics platform’s analysis further noted that this is the third time Binance’s funding rate has turned sharply negative since 2023.

This suggests that traders are largely anticipating further market declines, particularly in light of September’s Bitcoin cycles, which often herald further dips.

However, one external factor that has been a point of contention in recent days is Binance’s interactions with government entities.

Two days ago, Binance was hit with allegations of freezing Palestinian accounts at Israel’s behest. According to Quantum Ready, this prompted a mass exodus of Muslim traders.

“Imagine how many Muslims use Binance. They probably took their funds off because Israel was allowed to freeze gazan accounts.”

Such external forces could have influenced the demand for long positions, with traders closing their positions to protect their investments, either out of sympathy or apprehension.

Impact on Binance Coin (BNB)

A negative funding rate is expected to have a strong impact on Binance Coin (BNB). Reduced demand for funding rates suggests that investors are pessimistic about the asset’s price direction.

As evident from the price charts, BNB has been on a downtrend over the past 30 days. At press time, BNB is trading at $535.48 with a 7.62% drop over the past 7 days. This marks a significant decline from its recent high of $598, noted 2 weeks ago.

The drop also serves as an indication of the bearish sentiment prevailing in the market. The Relative Strength Index (RSI) at 46 has dropped from 62 in the last 7 days, suggesting an increase in selling pressure as traders close their positions.

Moreover, liquidations for long positions surged and remained relatively high over the past week. In fact, liquidations for long positions hit a high of $1.1 million over the past week – a sign of bearish sentiment.

The declining demand for BNB long positions is further supported by the negative OI-weighted funding rate. A negative weighted funding rate has been largely prevalent for BNB over the past week. Despite a moderate recovery, the weighted funding remained low, indicating a reduced demand for long positions.

In conclusion, Binance’s negative funding rate has impacted its native coin. BNB has seen a decline in demand for long positions, with longs being liquidated to imply bearish market sentiment.

In light of the increase in selling pressure, BNB could drop further to the $523 support level.

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