BTC volatility hits an annual low with a negative funding rate and premium

The negative sentiment has permeated the crypto market in the past few weeks. The bears have dominated Bitcoin’s price action since the sharp drop on May 19th. Since then, however, the BTC price has been consolidating with decreasing volatility.

The recent visit to the Puell multiple indicator in the oversold area together with the negative financing rates on the futures market and the negative premium on GBTC offer interesting data for interpretation. These indicators suggest that Bitcoin is about to take a big step. The question remains: will it increase or decrease?

Funding rate and negative premium

Funding rates have turned negative on most crypto exchanges since the crash on May 19, 2021, when Bitcoin price bottomed at $ 30,000. This means that futures market traders will pay a premium to maintain their short positions during the BTC consolidation from May to July 2021 (red rectangle).

Funding rate from BTC | Source: bybt.com

This situation means that most investors are expecting a decline and market sentiment is falling. On the other hand, it is also a hidden bullish signal as it is more profitable to take a long position and gives exchanges and whales the opportunity to set a bear trap.

We see a similar context with the Grayscale Bitcoin Trust (GBTC) premium. The premium is the difference between the value of an asset in a given fund and the market price.

The GBTC premium has remained positive from the start and investors are willing to pay more for an asset purchased through the fund, believing it will increase over time.

However, since the beginning of March 2021 we have seen the opposite development. The premium has fallen below the 0% line (black) and has remained negative (red rectangle) for the last 5 months.

Grayscale BTC Premium | Source: bybt.com

Bullish signal?

However, despite the negative funding rate and the negative premium on GBTC, some analysts see bullish signals here. In today’s tweet, analyst @CryptoCapo said the fact that these indicators remain negative in Bitcoin’s current price range is another reason for bullish expectations.

Source: Twitter

In addition, the analyst has linked these indicators to the bullish signal of the Puell Multiple. As Bitcoin Magazine recently reported, this indicator has hit the oversold (green) area where it has appeared only a few times in the entire Bitcoin price history.

Puell multiple display | Source: studio.glassnode.com

BTC volatility turns blue

High volatility is characteristic of cryptocurrencies. But even in this market we sometimes see phases of very low volatility that lead to price stability.

One of the best indicators of Bitcoin volatility is the BBWP (Bollinger Band Width), which measures the percentage difference between the upper and lower bands. The last time this indicator turned blue and signaled very low volatility, Bitcoin was in the range of USD 8,800 to USD 9,800 (green rectangle) for over a month in June-July 2020.

BTC / USD daily chart | Source: TradingView

Now, with BTC prices in the $ 30,000 to $ 34,000 range, volatility has hit rock bottom again. This could possibly indicate that the benchmark cryptocurrency is about to make a strong move. However, this indicator does not determine the direction of movement.

Conclude

Funding rates and negative premiums suggest that the overall sentiment of the crypto market is bearish. However, historical data shows that these are the best ways to buy Bitcoin at a discount. Feelings can change overnight.

The recent visit to the oversold zone of the Puell multiple indicator and the warning of a big move in the BBWP indicator could signal a long-term low for the crypto market.

SN_Nour

According to Beincrypto

Follow the Youtube Channel | Subscribe to telegram channel | Follow the Facebook page