Bitcoin to eventually bottom as perp funding rates remain negative: K33 report

While bearish sentiment remains sticky as macro uncertainty looms over crypto and traditional markets, it has led to a perpetual funding rate signal that points toward a potential market bottom for bitcoin, according to analysts at K33 Research. 

Bitcoin BTC -0.99% has struggled in recent weeks amid uncertainty over the economy, the impact of potential Federal Reserve rate cuts and weak U.S. jobs data. This has driven de-risking across markets, as the SP 500 and Nasdaq also witnessed negative returns for the start of September, K33 analysts Vetle Lunde and David Zimmerman wrote in a report on Tuesday.

With the correlation between bitcoin and the SP 500 reaching a 23-month high of 0.67, crypto markets will be more significantly impacted by Wednesday’s CPI release and the FOMC meeting on Sept. 18, when the Federal Reserve makes its highly anticipated latest interest rate decision, they said.

However, the persistent bearish sentiment has pushed daily average funding rates in the perpetual swaps market to the lowest since March 2023. The analysts noted that 30-day average funding rates have hit negative levels for just the seventh time since 2018. This offers a compelling case for positive price action in the months ahead.

Bullish end-of-the-year thesis for bitcoin

Monthly funding rates hitting negative levels have previously coincided with market bottoms. Since 2018, after 30-day average rates have flipped negative, average 90-day returns came in at 79%, with median 90-day returns at 55%, according to K33 data.

Bitcoin perps 30-day rolling average annualized funding rate. Image: K33 .

The negative funding rates have been met with a rise in open interest toward the highest levels since late July, which in combination exposes the market to short squeezes ahead, the analysts said

“This dynamic supports our bullish end-of-the-year thesis, adding to a FED pivot, U.S. election, FTX repayments, seasonality, delayed halving effects and a concluded supply overhang,” Lunde and Zimmerman added.

Meanwhile, Tuesday saw the largest net bitcoin outflow from exchanges since May, totaling $750 million , according to market intelligence platform IntoTheBlock — signaling “significant accumulation” by bitcoin holders.

Bitcoin net outflow from exchanges. Image: IntoTheBlock .

Bitcoin is currently trading at $56,718, according to The Block's Bitcoin Price Page , down 1% over the past 24 hours and 3% over the past month. However, the foremost cryptocurrency remains up by 34.2% year-to-date.