Bitcoin to eventually bottom as perp funding rates remain negative: K33 report

Quick Take

  • Persistent bearish sentiment in the perpetual swaps market has triggered negative funding rates, according to K33 analysts.
  • The analysts said average returns after 30-day average funding rates flip negative and sit at 79%, supporting the case for a bullish end to the year.

While bearish sentiment remains sticky as macro uncertainty looms over crypto and traditional markets, it has led to a perpetual funding rate signal that points toward a potential market bottom for bitcoin, according to analysts at K33 Research. 

Bitcoin has struggled in recent weeks amid uncertainty over the economy, the impact of potential Federal Reserve rate cuts and weak U.S. jobs data. This has driven de-risking across markets, as the S&P 500 and Nasdaq also witnessed negative returns for the start of September, K33 analysts Vetle Lunde and David Zimmerman wrote in a report on Tuesday.

With the correlation between bitcoin and the S&P 500 reaching a 23-month high of 0.67, crypto markets will be more significantly impacted by Wednesday’s CPI release and the FOMC meeting on Sept. 18, when the Federal Reserve makes its highly anticipated latest interest rate decision, they said.

However, the persistent bearish sentiment has pushed daily average funding rates in the perpetual swaps market to the lowest since March 2023. The analysts noted that 30-day average funding rates have hit negative levels for just the seventh time since 2018. This offers a compelling case for positive price action in the months ahead.

Bullish end-of-the-year thesis for bitcoin

Monthly funding rates hitting negative levels have previously coincided with market bottoms. Since 2018, after 30-day average rates have flipped negative, average 90-day returns came in at 79%, with median 90-day returns at 55%, according to K33 data.

Bitcoin perps 30-day rolling average annualized funding rate. Image: K33.

The negative funding rates have been met with a rise in open interest toward the highest levels since late July, which in combination exposes the market to short squeezes ahead, the analysts said

“This dynamic supports our bullish end-of-the-year thesis, adding to a FED pivot, U.S. election, FTX repayments, seasonality, delayed halving effects and a concluded supply overhang,” Lunde and Zimmerman added.

Meanwhile, Tuesday saw the largest net bitcoin outflow from exchanges since May, totaling $750 million, according to market intelligence platform IntoTheBlock — signaling “significant accumulation” by bitcoin holders.

Bitcoin net outflow from exchanges. Image: IntoTheBlock.

Bitcoin is currently trading at $56,718, according to The Block's Bitcoin Price Page, down 1% over the past 24 hours and 3% over the past month. However, the foremost cryptocurrency remains up by 34.2% year-to-date.


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About Author

James Hunt is a reporter at The Block and writer of The Daily newsletter, keeping you up to speed on the latest crypto news every weekday. Prior to joining The Block in 2022, James spent four years as a freelance writer in the industry, contributing to both publications and crypto project content. James’ coverage spans everything from Bitcoin and Ethereum to Layer 2 scaling solutions, avant-garde DeFi protocols, evolving DAO governance structures, trending NFTs and memecoins, regulatory landscapes, crypto company deals and the latest market updates. You can get in touch with James on Telegram or 𝕏 via @humanjets or email him at [email protected].

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