Bitcoin open interest (OI)-weighted perpetual futures funding ratio has hit multi-month highs, suggesting potential bullish sentiment in the short to medium term, according to one analyst.
The current OI-weighted funding rate is 0.012%, a level not seen since July 27, when Bitcoin briefly surged to $68,000. However, the largest digital asset by market capitalization saw a major price correction of 22% in early August after the highly leveraged market evaporated.
YouHodler Market Director Ruslan Lienkha explained that while a positive funding rate generally indicates bullish market conditions, it should be interpreted cautiously.
“Local peaks in positive funding rates could indicate a bullish trend in the short and medium term, but should not be relied upon for long-term predictions due to the volatile nature of cryptocurrency markets,” Lienkha told The Block.
According to Lienkha, financing rates in traditional markets such as commodities often reflect long-term trends due to their links to the slow-moving real economy. However, YouHodler analysts pointed out that cryptocurrency markets behave differently.
“Cryptocurrencies lack a direct link to real economic processes, so market sentiment can change much more quickly,” he said. As a result, funding rates in the cryptocurrency market are prone to volatility, making it a less reliable long-term indicator compared to other asset classes, he added.
Bitcoin futures funding rates have hit multi-month highs, indicating short- to medium-term bullish sentiment, one analyst said. Image: Coin Glass
Increased funding ratio due to increased liquidation
The increase in funding rates comes amid heightened market volatility leading to significant liquidations. According to Coinglass data, $93 million worth of Bitcoin positions were liquidated in the last 24 hours, $83 million of which were short positions. This means there has been a surge in bullish betting as the Bitcoin price recovers, forcing traders holding short positions to liquidate their positions.
The broader cryptocurrency market saw more than $240 million in liquidations over the same period, with the second-largest cryptocurrency, Ether, accounting for $50 million in liquidations and $43 million in short positions.
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After a period of consolidation over the weekend, Bitcoin has risen 6% in the past few hours, crossing its 200-day moving average and surpassing $65,000. According to Ryan Lee, senior analyst at Bitget, traders are watching this breakout closely, especially after several recent failed attempts to breach this key level. The focus now shifts to whether Bitcoin can maintain this upward momentum or could face another downtrend.
Lee expanded on the factors encouraging optimism surrounding Bitcoin’s recent price action. “Bitcoin 
BTC
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A break above $65,000 is significant, especially considering recent coin accumulation and renewed optimism about the US presidential election,” he told The Block.
Bitcoin is continuously attempting to break above the 200-day moving average. Image: TradingView
Positive inflation data boosts market sentiment.
The cryptocurrency market’s upward trend is also consistent with positive inflation data from the US Producer Price Index (PPI). On Friday, the PPI stood at 0%, below the positive forecast of 0.1%, indicating easing inflationary pressures. Core CPI, excluding highly volatile items such as food and energy, also fell short of expectations, falling from 0.2% to 0.1%. The PPI ratio compared to the previous year was 1.8%, strengthening investment sentiment towards risky assets such as cryptocurrency.
Lee noted that positive inflation data could act as a catalyst for further upward momentum for Bitcoin.
“The PPI report has allayed concerns about inflation that were heightened by the previous CPI release. This has helped support Bitcoin’s current rally and could set the stage for a year-end surge,” Lee said.
Going forward, Lee predicts that Bitcoin will trade between $50,000 and $80,000 by the end of the year, with greater volatility likely in the first quarter of 2025.
“If key economic indicators remain favorable and Bitcoin breaks current resistance levels, we could see further upward acceleration, especially as various market catalysts come into play,” he said.
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