Binance Coin (BNB) was up 30% in two weeks, but the fourth largest cryptocurrency by market cap appears to be struggling to break the $ 450 resistance. Coincidentally, this is the same high from June 3, followed by a 48% correction to $ 225.
Given the similarity of the situation compared to previous instances, investors have reason to doubt the recent performance, especially as Solana (SOL), a competing smart contract platform, hit an all-time high on August 18.
The move was attributed in part to a $ 70 million crowdfunding fund to support its decentralized exchange (DEX), Mango Markets, and the start of a well-drawn NFT project.
Binance Coin (BNB) price at Binance, in Tether (USDT). Source: TradingView
The BNB reacted negatively after the exchange suddenly stopped trading share brands on July 16 and investors became increasingly concerned that regulatory hurdles would severely affect the exchange’s growth.
At the end of July, the suspension of derivatives trading for Binance’s European and Hong Kong customers compounded BNB’s problems. On August 18, De Nederlandsche Bank, the Dutch central bank, issued a warning to Binance after it concluded that the exchange was offering crypto services to local residents. The agency accuses the company of failing to comply with the country’s anti-money laundering and anti-terrorist financing laws.
The BNB premium for open-ended contracts has disappeared
Derivative data gives a good insight into the positioning of whales and professional traders in Binance Coin (BNB).
Even if futures contracts long (buyer) and short contracts (seller) match at all times, their leverage can vary. So by measuring the funding rate of the perpetual contracts, one can determine how bullish or bearish these investors are.
Derivatives exchanges require the side that demands more leverage to be paid to the other side. Usually it is billed every 8 hours, but some exchanges like FTX have hourly rates.
In neutral markets, the financing rate tends to fluctuate between 0% and 0.03% on the positive side. This number equals 0.6% per week and indicates that longs are the numbers.
Binance Coin USD / USDT Margin Futures 8-Hour Financing Rate. Source: Bybt.com
There was a slightly bullish positive funding rate of 0.10% between August 11 and August 17, but it has been reversing in the past few days. Although the current value is completely different from the bearish negative 0.15% indicator from the end of July, it does not inspire confidence among leverage traders.
Related: Altcoins rise after Bitcoin price bounces off a major moving average
Professional traders did not become bullish
To confirm whether this data reflects a specific problem related to the perpetual contracts, let’s look at the quarterly premium for futures contracts. Retailers typically avoid the quarterly contracts as they have to calculate the futures premium or manually roll positions before they expire.
In contrast to the open-ended contracts, these fixed-term instruments do not have an adjustment to the funding rate. Any imbalances in demand are therefore reflected in a price difference compared to the regular spot markets.
Healthy markets should have a premium of 0.2% to 1% in the quarterly contracts, while a negative indicator is a bearish situation known as backwardation.
Binance Sept. BNB / USDT futures premium compared to the regular spot market. Source: TradingView
The data confirms the mid-July downward move previously seen in the funding rate as futures contracts were down 5% in September. However, the quarterly contract has been neutral for the past few weeks, suggesting neutral to bearish sentiment among professional traders.
Derivatives indicators show no signs of an upward trend on the part of investors. It is also clear that retailers and whales currently have little confidence that the $ 450 mark will be broken in the short term.
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