The funding rates for perpetual futures contracts linked to the cryptocurrency BNB have fallen to their lowest level in almost three months, indicating increased bearish sentiment.
Sentiment has turned bearish among traders of perpetual futures contracts for the cryptocurrency BNB. This comes as BNB faces challenges on multiple fronts.
Data from Coinglass shows open interest and volume-weighted funding rates for BNB perpetual futures have fallen to -0.18%, the lowest level since late April. This indicates shorts, or traders betting on a price drop, are dominant. Shorts are willing to pay longs to keep their bearish bets open, with funding charged every 8 hours.
According to Huf, co-founder of Pear Protocol, “BNB is being heavily shorted” based on the highly negative funding rates. The derivatives market is leaning bearish on BNB’s outlook.
Huf added that sentiment has worsened due to recent high-profile staff departures from Binance, issues with BCH withdrawals on Binance.US, and the pending Department of Justice case against Binance CEO Changpeng “CZ” Zhao. Since BNB is the native token of the Binance ecosystem, crypto traders tend to associate it with the exchange’s performance.
Facing worldwide regulatory pressure, Binance has laid off 1,000+ employees in recent weeks. Earlier this month, three senior officials left citing concerns over CZ’s handling of the DOJ money laundering investigation.
Over the weekend, CZ tried to ease concerns, calling the layoffs involuntary terminations and dismissing reported layoff figures as exaggerated. He tweeted “We are still hiring” to reassure markets. However, negative funding rates show traders remain bearish on BNB amid the exchange’s challenges.
The cryptocurrency market remains cautious, as evidenced by the highly negative funding rates on Binance’s futures platform. Some observers fear more bad news may be on the horizon after seeing the -92% 24hr annualized premium rate.
Traders are wondering if the recent court ruling in favor of Ripple over the SEC has implications for Binance’s own legal battle with regulators. Last week’s decision stated XRP is not a security when sold to retail investors on exchanges like Binance, but is a security when offered to institutions.
This ruling could potentially aid Binance’s defense against the SEC’s charges of offering unregistered securities. However, the negative funding rates show traders are still uncertain if the Ripple verdict will actually benefit Binance in its fight with regulators. The market mood remains nervous as traders await further developments.
There is potential for a short squeeze in Binance Coin (BNB) based on the high amount of bearish positions currently open. A short squeeze occurs when the price rises rapidly, forcing short sellers to close out their trades and buy back the asset, further pushing the price up.
BNB perpetual futures have an unusually large amount of open short interest right now. Even a minor uptick in price could trigger short sellers to start covering and create positive momentum.
According to Skew, if BNB can break above $265 it may spur short-covering leading to a squeeze. However, below $218 BNB looks weak and could see further downside.
Currently, BNB is trading around $242, so it remains at a critical point between upside potential if shorts cover and further weakness if the $218 support breaks down. The high short interest has created conditions ripe for a volatile price swing in either direction depending on whether bulls or bears gain control.
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