According to Cryptoquant, the funding rates on Binance have turned negative once again, marking the third occurrence since 2023. This shift is noteworthy as a negative trend in funding rates on Binance often precedes significant market movements.
The on-chain analytics platform stated,
“Binance Funding Rates Trending Negative. Since 2023, this marks the third time the FR has entered negative territory for an extended period.”
Nino, a Cryptoquant analyst, highlighted that the historical data surrounding these market conditions has garnered renewed attention, potentially signaling major market events ahead.
Funding rates are essentially periodic payments between short and long-term traders, typically influenced by the market disparity between perpetual contracts and spot prices. Positive funding rates indicate that long position holders are compensating short positions, reflecting a bullish market sentiment where investors are willing to pay a premium to maintain their positions. Conversely, negative funding rates suggest that short position holders are paying long positions, pointing to a potential market correction or bearish sentiment.
The recent analysis further reiterated that this is the third instance since 2023 where Binance’s funding rate has turned negative. This trend suggests traders are anticipating further market downturns, mirroring fears associated with September-based Bitcoin cycles.
However, Binance's recent controversy involving government associations may have exacerbated market conditions. Two days ago, Binance faced accusations of freezing accounts belonging to Palestinians at Israel's request. Quantum Ready noted that many Muslims might have withdrawn their funds from Binance, stating,
“Imagine how many Muslims use Binance. They probably took their funds off because Israel was allowed to freeze Gazan accounts.”
These external factors may have dampened demand for long positions, prompting cautious and sympathetic traders to close their positions to safeguard their investments.
Impact on Binance Coin (BNB)
The negative funding rate is expected to significantly impact Binance Coin (BNB). A reduced demand for funding rates indicates a lack of investor confidence in the asset's direction. Over the past 30 days, BNB has experienced a decline, dropping 7.62% in the last seven days to trade at $535.48. This represents a notable decrease from its recent peak of $598 just two weeks prior.
The broader market sentiment remains bearish, as evidenced by a decline in the Relative Strength Index (RSI) from 62 to 46 over the last week, reflecting increased selling pressure. Additionally, liquidations for long positions have surged, reaching $1.1 million over the past week, further underscoring bearish sentiment.
The fall in demand for BNB long positions is corroborated by the declining open interest (OI)-weighted funding rate, which remains low despite some moderate recovery.
In summary, Binance's negative funding rate has had a detrimental effect on its native coin, BNB. With a decrease in demand for long positions and an increase in liquidations, bearish sentiment prevails. As selling pressure continues to rise, BNB could potentially fall further, possibly reaching the $523 support level.
