Trouble Ahead? Binance Coin Futures Market Under Pressure With Negative Funding Rates

The forecast for Binance Coin (BNB) has grown less optimistic, as indicators from the futures market and technical analysis suggest a downward trend. According to our study of Coinglass data, the negative funding rates and decreasing open interest in BNB futures contracts reflect increasing skepticism among traders.

A negative funding rate indicates that more traders are betting against the price increase of an asset, such as BNB, which had a funding rate of -0.012% on April 1st.

Binance Coin Funding Rate And Open Interest Down

Adding to the pessimistic perspective, the open interest for BNB‘s futures contracts has decreased by 0.15% recently. Open interest represents the number of unfilled futures contracts in existence.

A drop in open interest may indicate that traders are closing their existing positions without replacing them with new ones, possibly suggesting a decline in market faith.

Trouble Ahead? Binance Coin Futures Market Under Pressure With Negative Funding Rates

In simplified terms, funding rates play an essential role in maintaining the price equivalence between perpetual futures contracts and the current market value (spot price). If the contract price is above the spot price, long positions are required to make regular payments (fees) to short positions, leading to positive funding rates.

In simpler terms, when the price in a contract is lower than the current market price, it means short sellers are having to pay extra to long holders, which is referred to as negative funding rates.

Trouble Ahead? Binance Coin Futures Market Under Pressure With Negative Funding Rates

More Traders Close Their Positions

With increasing negativity, it’s anticipated that open interest in BNB will continue to decrease. In simpler terms, as more traders choose to close their positions rather than opening new ones, there is a possibility of a price decline for BNB.

In simpler terms, the pessimistic attitude towards the market isn’t limited to just the futures contracts. The MACD technical indicator, another tool for analyzing financial trends, indicates that there might be renewed selling activity coming up.

The MACD line could soon dip below the signal line in the BNB chart, which is often seen as a bearish signal indicating that sellers are regaining control of the market. Since March 18th, the MACD lines for BNB have suggested a downward trending pattern.

Trouble Ahead? Binance Coin Futures Market Under Pressure With Negative Funding Rates
BNB Price Retreat In The Offing?

Based on the insights from the futures market and technical analysis, BNB‘s price may experience a short-term decrease. Yet, it’s crucial to remember that market opinions can change swiftly, and these indicators don’t always accurately forecast price trends.

Currently, BNB is being bought and sold for around $587 on the cryptocurrency market, representing a 6% increase in value over the past 24 hours according to information provided by CoinMarketCap.

Meanwhile, a closer look at BNB’s technical indicators on the 24-hour chart reveals another trend.

Using simple terms, the Directional Movement Index (DMI) indicates market trends’ strength. When the negative index surpasses the positive index in this index, it signifies a bearish crossover. In simpler words, this situation implies that bearish momentum is currently more powerful than bullish momentum in the market.

In simpler terms, when this specific intersection occurs, many analysts believe it’s a warning for traders to think about selling their longer-held stocks and buying shorts instead.

With the DMI pointing to a popular trend, this tactic fits right in, adding weight to the belief that most traders in the market are bearish.

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2024-04-04 17:11