Long position traders remain willing to pay a fee to short position traders for bitcoin and ether, with this so-called funding rate indicating that crypto assets are bullishly charting their own course. Meanwhile, the CoinDesk Indices Ether Trend Indicator is signaling increased strength for the second largest cryptocurrency by market cap.
Funding rates are periodic payments that traders on perpetual futures markets pay from one side of the trade to the other. This fee is determined by the difference between spot prices and futures contract prices. When bitcoin futures prices are higher than spot prices, traders with long positions pay a fee to traders with short positions.
Funding rates ensure that spot and futures prices for crypto assets converge, as they do in traditional derivatives markets. Positive funding rates indicate positive investor sentiment, while negative rates indicate the opposite.
Funding rates for bitcoin and ether have been positive since May 14 and May 27, respectively. The positive sentiment comes as the Securities and Exchange Commission (SEC) has filed lawsuits against crypto exchange giants Binance and Coinbase for allegedly violating securities law, and targeted digital assets more broadly.
“We don’t need more digital currency. We already have digital currency, it’s called the U.S. dollar”, stated SEC Chair Gary Gensler.
At the moment, market participants do not appear to share that sentiment, as bitcoin and ether prices reside near pre SEC announcement levels.
BTC, ETH decouple
BTC and ETH appear to have decoupled from nearly everything, except each other.
BTC correlations with the U.S. dollar, S&P 500, Nasdaq Composite and Copper are near zero, indicating little to no pricing relationship. BTC’s correlation with ether remains high at 0.79. Correlations range between 1 and -1, with the former indicating a direct relationship, and the latter indicating an inverse one.
Meanwhile the CoinDesk Indices Ether Trend Indicator (ETI), is signaling that the asset has entered a “significant uptrend,” an improvement over its reading just a day prior.
The ETI indicates the direction and strength of momentum in the asset using a series of moving averages. The one day improvement indicates that recent bullish price action is outpacing previous price moves.
