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In perpetual futures tied to BNB, funding rates are most negative in nearly three months.
The BNB token’s perpetual futures market is witnessing a prevailing bearish sentiment among traders, with the embattled cryptocurrency grappling with a challenging landscape on multiple fronts.
According to the information gathered by Coinglass, data indicates that in the perpetual futures market, both “open interest” (the total value of outstanding positions) and “volume-weighted funding rates” have decreased to -0.18%. This is the lowest value seen since late April. The decline in funding rates suggests that traders with “short” positions (those who expect the price to go down) are prevailing, and they are even willing to pay traders with “long” positions (those who expect the price to go up) to keep their bearish bets active. It’s important to note that funding rates are charged every eight hours.
According to Huf, one of the co-founders of Pear Protocol who prefers to stay anonymous, there is a substantial amount of short-selling happening with BNB. This observation is linked to the deeply negative funding rates.
“People are feeling more negative because some important staff members recently left, there were issues with withdrawing BCH from Binance.US, and the CEO of Binance, Changpeng “CZ” Zhao, is facing a case from the Department of Justice. This is what Huf said. BNB is the token used in the BNB ecosystem, created by Binance. People who trade cryptocurrencies usually link this token to how well the exchange is doing.”
Due to global regulatory pressures, Binance, a cryptocurrency company, had to lay off over 1,000 employees. Three senior officials left the company because they were unhappy with how the CEO, CZ, handled the investigation into possible money laundering by the company.
Over the weekend, CZ tried to calm market nerves, calling recent layoffs involuntary terminations and dismissing the layoff figure reported by media as FUD (fear, uncertainty and doubt).
“We are still hiring,” CZ announced in a tweet on Saturday.
Still, the market remains nervous, as evident from the deeply negative funding rates, with some observers fearing more bad news ahead.
“24h APR -92% ~ Typically, these readings precede some bad news for Binance Wonder what’s coming?” pseudonymous trader Skew tweeted on Sunday.
The negative funding rate also shows traders are still determining whether the recent U.S. court’s ruling favouring Ripple would help Binance fight against the U.S. Securities and Exchange Commission.
Last week, there was an important decision made by a court about Ripple Labs and the SEC. The court said that when regular people buy XRP through certain exchanges, it’s not considered a security violation. However, if big investment companies buy it, then it will be treated as a security violation. Also, in June, the SEC accused Binance and Coinbase of offering securities without registering them on their platforms.
Potential for short squeeze
A short squeeze is a rapid move higher driven by bears abandoning their bearish bets. The market needs to have a higher-than-usual bearish activity for a short squeeze to occur, as is the case in BNB perpetual futures. In such situations, a minor price bump can send bears or short sellers running to square off their positions, which, in turn, drives prices further up.
Per Skew, a move above $265 could see some short covering.
“BNB Weak as long as price trades below $265, back above there, I could see some illiquid short covering rally. Else eventually below the monthly range low $218,” Skew tweeted.
At press time, BNB traded at $242.
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