Given Binance’s regulatory issues and its obligatory KYC policy, traders have conflicting feelings about BNB’s future.
Binance Coin (BNB) has risen 30% in the last two weeks, but the fourth-largest cryptocurrency by market capitalization appears to be failing to break through the $450 barrier. This is the same June 3 high that was followed by a 48 percent drop to $225.
Given the situation’s resemblance to previous instances, investors have reason to be skeptical of the recent performance, especially since Solana (SOL), a competitor smart contract platform, hit an all-time high on August 18.
A recent $70-million crowdfund to promote its decentralized exchange (DEX), Mango Markets, and the debut of a well-subscribed NFT project were also factors in the decision.
BNB fell sharply when the exchange abruptly halted stock token trading on July 16, raising investor concerns that regulatory constraints will stifle the platform’s expansion.
The suspension of derivatives trading for Binance’s European and Hong Kong clients in late July added to the company’s troubles. The Netherlands’ Central Bank, De Nederlandsche Bank, issued a warning to Binance on August 18 after deciding that the exchange provided crypto services to Dutch residents. According to the authority, the company is not following the country’s Anti-Money Laundering and Anti-Terrorist Financing Act.
The position of whales and professional traders in Binance Coin can be determined using derivatives data (BNB).
Even while longs (buyers) and shorts (sellers) in future contracts are always matched, their leverage might fluctuate. By assessing the perpetual contracts financing rate, one can tell if those investors are bullish or bearish.
The party wanting additional leverage will be charged by derivatives exchanges, which will be paid to the opposing side. It is usually calculated every eight hours, however certain exchanges, such as FTX, calculate it hourly.
In neutral markets, the funding rate tends to vary from 0% to 0.03% on the positive side. This number is equivalent to 0.6% per week and indicates that longs are the ones paying it.
Between Aug. 11 and Aug. 17, there was a slightly bullish 0.10% positive funding rate, but it dissipated over the past few days. Although entirely different from the bearish negative 0.15% indicator seen in late July, the current reading does not transpire confidence from leverage traders.
Professional traders have not turned bullish
Let’s look at the quarterly futures contracts premium to see if this data shows a distinct issue with perpetual contracts. The inconvenience of calculating the futures premium or manually rolling over positions nearing expiration is why most retail traders avoid quarterly contracts.
Unlike perpetual contracts, these fixed-date instruments do not have a funding rate adjustment. As a result, future demand imbalances are reflected in a price differential from typical spot markets.
A healthy market should have a 0.2 percent to 1% premium in quarterly contracts, while a bearish scenario known as backwardation is a negative indicator.
The data backs up recent bearishness on the funding rate, which was seen in mid-July when the September futures contracts showed a 5% discount. However, over the last few weeks, the quarterly contract has been neutral, indicating a neutral-to-bearish mood among professional traders.
Investors’ bullishness is not reflected in derivatives indications. It’s also evident that regular traders and whales aren’t optimistic about the $450 level being broken in the near term.