4 April 2024
The outlook for Binance Coin (BNB) has turned cloudy, with both futures market data and technical indicators flashing bearish signals. Based on our analysis of Coinglass data, negative funding rates and declining open interest in BNB futures contracts paint a picture of growing pessimism among traders.
A negative funding rate suggests that more traders are holding short positions, anticipating a decline in the price of the asset. This sentiment was confirmed on April 1st, when BNB’s funding rate dipped into negative territory at -0.012%.
Binance Coin Funding Rate And Open Interest Down
Further fueling the bearish narrative, BNB’s futures open interest has also witnessed a slight decline of 0.15%. Open interest reflects the total amount of outstanding futures contracts that haven’t been settled yet.
A decrease in open interest suggests traders are exiting their positions without opening new ones, potentially signaling waning confidence in the market.
Funding rates are a crucial mechanism in perpetual futures contracts that keep the contract price aligned with the spot price. When the contract price trades higher than the spot price, long position holders pay a fee to shorts, resulting in positive funding rates.
Conversely, negative funding rates materialize when the contract price dips below the spot price, indicating that short sellers are currently paying fees to longs.
More Traders Close Their Positions
As negative sentiments mount, this open interest is expected to plummet further. This would imply that more traders are closing their positions and not opening new ones, suggesting a potential price drop for BNB.
The bearish sentiment isn’t confined to the futures market. The Moving Average Convergence Divergence (MACD), another technical indicator, is suggesting a possible resurgence in selling pressure.
There’s an indication that the MACD line might cross below the signal line, typically interpreted as a bearish sign signaling the return of sellers to the market. It’s noteworthy that since March 18th, the MACD lines for BNB have been positioned for a downtrend.
BNB Price Retreat In The Offing?
Considering both the futures market and technical analysis, there’s a potential for a short-term decline in BNB’s price. However, it’s important to acknowledge that market sentiment can shift rapidly, and technical indicators aren’t infallible predictors of future price movements.
At the time of writing, BNB was trading at $587, up 6% in the last 24 hours, data from CoinMarketCap shows.
Meanwhile, a closer look at BNB’s technical indicators on the 24-hour chart reveals another trend.
The Directional Movement Index (DMI), used to gauge trend strength, displayed a bearish crossover where the negative directional index sits above the positive directional index. This positioning suggests that bearish momentum is currently dominating the market.
Analysts commonly interpret this particular crossover as an imperative signal prompting traders to consider exiting long positions and initiating short positions.
This strategic move aligns with the prevailing trend indicated by the DMI, reinforcing the notion of a prevailing bearish sentiment within the market ecosystem.
Featured image from Pexels, chart from TradingView