Binance Coin (BNB) is up 30% in two weeks, but the fourth-largest cryptocurrency by market cap appears to be struggling to overcome resistance at $ 450. Coincidentally, this is the same high on June 3, followed by a 48% correction to $ 225.
Given the similarity of the situation when compared to previous cases, investors have reason to doubt the recent performance, especially since Solana (SOL), a competing smart contract platform, hit an all-time high on August 18.
The SOL token rally is attributed in part to a recent financing of USD 70 million to support your decentralized exchange (DEX), Mango Markets, and the launch of a well-signed NFT project.
The BNB token reacted negatively after the exchange suddenly stop trading tokenized stocks July 16, and that there was growing concern among investors that regulatory hurdles would seriously affect the platform’s growth.
At the end of July, The closure of derivatives trading for Binance’s European and Hong Kong clients added to the problems of the exchange’s native currency. On August 18, De Nederlandsche Bank, the Central Bank of the Netherlands, issued a warning to Binance after concluding that the exchange offered cryptocurrency services to citizens. The authority alleges that the company is not acting in accordance with the laws against money laundering and the financing of terrorism in the country.
BNB perpetual contracts premium disappeared
The derivatives data gives a good idea of how whales and professional traders position themselves in the Binance Coin (BNB) market.
Although long perpetual contracts (buyers) and short (sellers) maintain the same number at all times, their leverage can vary. Therefore, by evaluating the funding rate of perpetual contracts, it can be determined how bullish or bearish these investors are.
Derivatives exchanges will charge a fee to the party demanding the most leverage, which is paid to the opposing party. It is usually calculated every 8 hours, but some exchanges like FTX have hourly rates.
In neutral markets, the financing rate (base) tends to range between 0% and 0.03% on the positive side. This figure is equivalent to 0.6% per week and indicates that longs pay this commission.
Between August 11-17, there was a slightly bullish 0.1% positive funding ratio, but it dissipated in recent days. Although it is totally different from the negative indicator of 0.15% observed at the end of July, the current reading does not exude confidence from traders using leverage.
Professional traders haven’t turned bullish
To confirm whether this data reflects any issues specific to perpetual contracts, let’s look at the premium for quarterly futures contracts. Retail traders often avoid quarterly contracts because of the hassle of calculating the futures premium or manually rolling over positions as expiration approaches.
These fixed-date instruments do not have a financing rate adjustment, unlike perpetual contracts. Therefore, eventual imbalances in demand are reflected in a price difference compared to regular spot markets.
Healthy markets should show a premium of 0.2% to 1% on quarterly contracts, while a negative indicator is a bearish situation known as backwardation.
The data confirms the downtrend in mid-July on financing rates, as the futures contracts for September showed a discount of 5%. However, the quarterly contract has been neutral for the past few weeks, indicating neutral to bearish sentiment from professional traders.
Derivatives indicators show zero bullish signals from investors. It’s also clear that retail traders and whales currently have little confidence that the $ 450 level will break out in the short term.
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