Bitcoin perpetual traders seem to be the only ones unmoved by the digital asset’s recent breakout. BTC which has had a tremendous rally during the first half of the week had been able to break out of the slump of the low $40,000s and moved on an upward trajectory above $47,500. However, perp traders have not reacted much to it given the state of the funding rates.

The bitcoin perpetual traders are not reacting to the recent upside as expected. This is evidenced in the fact that the perp basis is still sitting at or even below neutral funding rates, marking the 115th consecutive day that this has remained the case. This speaks volumes to how perp traders are viewing the market. Regardless of the bitcoin price increase, they have not increased their activity in any significant way.

It could easily mean that perp traders are not convinced by the recent price movement. As with the previous uptrends recorded this year, it could mean that perp traders are expecting the digital asset to go the same way. However, this uptrend has differed from its predecessors given the fact that it has broken above the $45,000 resistance point and possesses the potential to climb towards $50K.

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Funding rates have refused to be moved, however. Even going as far as falling below the neutral funding rate. This follows the trend for the year so far, given that there have been no positive funding rates recorded in 2022. The decline in funding rates can be attributed to long traders closing their positions, which have caused perpetual prices to either align or continue to trail behind spot prices.

Funding rates are not the only metric that shows perp traders remain uninterested in the uptrend. Open interest in perpetual has also declined recently. In the space of less than a week, it had fallen from 256K BTC to 245K BTC. One explanation for this could be the short liquidations that have rocked the market since bitcoin began this recovery.

The USDT collateralized BTC perp on Binance is known to be the largest perp instrumental. This instrument had recorded a new all-time high recently as open interest had gone up. It was swiftly followed by both neural/low funding rates and even long-short ratios below 1. All of this is to say that there is the possibility of crowding on the short side.

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An implication of this, notes Arcane Research, would be a suggestion that leverage in the crypto market remains “relatively lofty.” However, this comes with some negative sentiments. Together, this “could be a potent setup for a short squeeze if the strong momentum holds” the report reads.

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