Bitcoin funding rates on Binance, the world’s largest cryptocurrency exchange by trading volume, have dropped to their lowest levels of the year, signaling a significant shift in market sentiment.
According to CryptoQuant on-chain analyst EgyHash, Bitcoin funding rates on Binance have remained negative for three consecutive days, a trend not seen since October 2023.
This negative shift indicates that short positions—bets on a decline in Bitcoin’s price—are now outpacing long positions, reflecting increasing bearishness among traders.
Binance Funding Rates Reflect Market Sentiment
Funding rates on Binance have traditionally served as an indicator of market sentiment, showing the balance between short and long positions.
When funding rates turn negative, it means traders with short positions must pay those with long positions, signaling a higher demand for shorts.
EgyHash’s data reveals that current funding rates are at their most negative point this year, highlighting the dominance of short positions in the perpetual futures market.
The broader market sentiment is also becoming more cautious, as the average Bitcoin funding rate across all exchanges has also turned negative.
A report from 10x Research on August 16 noted a lack of institutional interest in Bitcoin at current price levels.
The report cited the seven-day minting ratio, a key stablecoin metric that tracks Bitcoin buying activity, as evidence that institutions are hesitant to engage with the market.
However, despite the negative funding rates and declining institutional interest, there are still signs of optimism in the market.
On August 15, spot Bitcoin exchange-traded funds (ETFs) saw inflows of $11.11 million, even as interest in the Grayscale Bitcoin Trust (GBTC) waned.
According to Sosovalue data, the total net asset value of spot Bitcoin ETFs has risen to $51.99 billion, with cumulative net inflows reaching $17.33 billion.
Institutional Investors Boost Bitcoin ETF Holdings in Q2
A growing number of institutional investors are increasing their Bitcoin holdings through spot ETFs, as recent data from Bitwise shows.
In the second quarter of 2024, about 66% of these investors either maintained or expanded their Bitcoin ETF positions.
Bitwise’s analysis of 13F filings submitted to the Securities and Exchange Commission (SEC) reveals that 44% of asset managers increased their Bitcoin ETF holdings during the quarter, while 22% opted to maintain their positions.
In contrast, only 21% of institutional investors reduced their holdings, and a smaller 13% decided to exit entirely.
Recently, the digital asset market experienced a significant rebound, with investment products attracting $176 million in inflows as investors took advantage of price dips.
Ethereum was the standout performer during the week, drawing in $155 million in inflows and bringing its year-to-date total to $862 million, the highest level of investment since 2021.