Analyst: Two key indicators are suggesting that BTC prices may rise

Two key Bitcoin trading indicators — the funding rate and the three-month annualized basis rate — could suggest that prices could soon rise, according to a cryptocurrency analyst.

“It looks like we are consolidating before the next leg up, ” Will Clemente, co-founder of Reflexivity Research, wrote in a May 7 X ​​post. He explained that Bitcoin’s funding rate and base rate have “cooled down” after briefly reaching negative values.

Bitcoin’s funding rate fell into negative territory several times in April. Source: Will Clemente

Bitcoin’s funding rate is often used to track overall trader sentiment in the cryptocurrency market. Exchanges use this rate to balance traders entering long positions with those choosing short positions to mitigate the risk of overexposure.

When long traders are more dominant, the funding rate is positive, indicating their confidence in the rise of Bitcoin prices.

According to CoinGlass, as of this writing, the OI weighted funding rate is 0.0091%, having recovered from a negative rate of -0.0050% on May 4.

“Sounds like the calm before the storm,” said anonymous crypto commentator Crypto Empire.

“The fact that the Bitcoin funding rate remains so low and Bitcoin is rebounding makes me feel very optimistic, ” anonymous cryptocurrency trader Mister Crypto responded to their 98,000 X followers.

The slight increase in Bitcoin’s price also reflected the change in funding rates over the four-day period, with Bitcoin’s price rising 1.11% to $62,361, according to CoinMarketCap.

However, liquidation data contradicts this, indicating that futures traders remain bearish and expect prices to fall in the near term.

If the price rises 3.5% to the key level of $65,000, $1.36 billion of short positions could be liquidated, while conversely, if the price falls 3.5% to $60,500, only $650 million of long positions would be eliminated.

Bitcoin 3-month annualized benchmark interest rate. Source: Will Clemente

Meanwhile, some traders also noted that the annualized basis for Bitcoin on major exchanges such as Binance, OKX and Deribit has risen to the high end of the neutral range of 5-10%.

The annualized basis rate is a measure of the difference in cost between a Bitcoin futures contract and the actual price of Bitcoin.

Traders generally view interest rates above 10% as a neutral to bullish signal.