Binance Coin (BNB) rose 30% in two weeks, but the fourth largest cryptocurrency by market cap appears to be struggling to break through the resistance of $ 450. Coincidentally, this is the same high from June 3, which was followed by a 48% correction to $ 225.
Given the similarity of the situation to previous instances, investors have reason to doubt recent performance, especially as Solana (SOL), a competing smart contract platform, hit an all-time high on August 18.
This decision was partially attributed to a recent $ 70 million crowdfunding to support its decentralized exchange (DEX), Mango Markets, and the launch of a well-subscribed NFT project.
The BNB reacted negatively after the exchange suddenly halted trading in stock tokens on July 16 and investors increasingly worried that regulatory hurdles could seriously affect the growth of the exchange.
At the end of July, the closure of derivatives trading for Binance’s European and Hong Kong clients exacerbated BNB’s problems. On August 18, De Nederlandsche Bank, the central bank of the Netherlands, issued a warning to Binance after concluding that the exchange offered crypto services to local residents. The authority alleges that the company is not acting in accordance with the national law on money laundering and terrorist financing.
The premium for BNB indefinite contracts has disappeared
The derivatives data gives a good overview of how whales and professional traders are positioned in Binance Coin (BNB).
Even though long (buyers) and short (sells) futures contracts are matched at all times, their leverage may vary. Thus, by measuring the funding rate of perpetual contracts, one can determine to what extent these investors are bullish or bearish.
Derivatives exchanges will charge the side requiring more leverage, which is paid to the opposite side. Usually it’s calculated every 8 hours, but some exchanges like FTX have hourly rates.
In neutral markets, the funding rate tends to vary from 0% to 0.03% on the positive side. This number equates to 0.6% per week and indicates that it is the longs that pay it.
Between August 11 and August 17, there was a slightly bullish positive finance rate of 0.10%, but it has dissipated in the last few days. Although entirely different from the negative bearish indicator of 0.15% seen at the end of July, the current reading does not sweat the confidence of the leveraged traders.
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Professional traders haven’t gone bullish
To confirm whether this data reflects a specific issue with perpetual contracts, let’s take a look at the quarterly premium for futures contracts. Retail traders generally avoid quarterly contracts because of the hassle of calculating the term premium or manually renewing positions nearing expiration.
These fixed-maturity instruments do not include a funding rate adjustment, unlike perpetual contracts. Therefore, any imbalances in demand translate into a price difference compared to regular spot markets.
Healthy markets should show a 0.2% to 1% premium in quarterly contracts, while a negative indicator is a bearish situation known as a backlash.
The data confirms the previously observed mid-July drop in the funding rate, with September futures down 5%. However, the quarterly contract has been neutral over the past few weeks, indicating a neutral to bearish sentiment on the part of professional traders.
Derivative indicators show no sign of optimism from investors. It is also clear that retail traders and whales currently have little confidence that the $ 450 level will be exceeded in the near term.
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