Bitcoin Funding Rate Turns Negative for the First Time this Year

Bitcoin futures and derivatives data confirms that the premier crypto asset’s funding rate silently turned negative for the first time this year, right before the halving.

Market data provider Kaiko highlighted this occurrence while discussing Bitcoin’s network condition right before and immediately after the latest Bitcoin halving, which occurred at midnight on April 20. The recent halving slashed Bitcoin’s block reward from 6.25 to 3.125 BTC, essentially decreasing its inflation rate.

With the sentiment surrounding the event, Kaiko confirmed in a recent report that the halving is already having far-reaching effects on Bitcoin. Part of this impact occurred right before the halving, with BTC funding rate flipping negative for the first time this year.

Funding rates for $BTC perps turned negative for the first time since late 2023 in the lead up to the halving. pic.twitter.com/MjiU4C1L5m

— Kaiko (@KaikoData) April 24, 2024

Data from crypto derivatives and futures market platform Coinalyze confirms Kaiko’s disclosure. Notably, Bitcoin’s aggregated funding rate across all major derivatives markets slumped to -0.0030 on April 18, marking the first negative figure for the year. 

The last time the BTC funding rate dropped to the negative territory was on Oct. 19, 2023, when it collapsed to -0.0047. Since then, the metric had remained in the positive zone, surging to a peak of 0.0669 on March 31, this year. However, it continued to decline from this high, ultimately hitting the negative figure on April 18.

The metric also saw a negative value on April 19, the day before the Bitcoin halving, flashing -0.0006. A negative funding rate shows that short positions are paying long positions. This could indicate increased bearish sentiment, as short positions move to compensate long positions for their exposure.

Bitcoin Sees Resurgence of Bullish Sentiments

Following the two consecutive days of negative values, Bitcoin’s funding rate has recovered shortly after the halving, with the latest value being 0.0051. Aggregated Open Interest (OI) has also recovered since dropping to $15.55 billion on April 17. OI has now increased to the current figure of $17.18 billion.

At press time, the BTC Long/Short Ratio has also seen an increase to 1.46 over the last 24 hours, suggesting that market participants are now more bullish than bearish. Kaiko further attested in its report that the latest Bitcoin halving has so far affected Bitcoin’s price more positively than the previous three ones.

According to Kaiko, at the time of its report, BTC was up 3% since the halving. This marked a more substantial increase than what was observed after the 2012, 2016 and 2020 halving events. Despite a subsequent 2% drop over the last 24 hours, BTC is still up 2.1% since the halving.

Bitcoin currently trades for $65,218, down 8.65% this month. Closing April with a decline would mark Bitcoin’s first red monthly candlestick this year. Despite the short-term downward push, investors remain optimistic. CryptoQuant author Trader Oasis stressed that the declining funding rate was positive for BTC, noting the current bullish Coinbase Premium Index.