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Bitcoin funding rates for margin positions have jumped to their highest level in more than two weeks in the past two days, according to data from crypto exchanges OKX and dYdX. A positive funding rate suggests that speculators are bullish and that long traders are paying short traders.
Bitcoin’s funding rate spike comes after the cryptocurrency’s latest price rally, hitting an eight-month high of $25,270 on Thursday before falling to the $21,300s this week. It is Bitcoin has since bounced back to the low $23,000s, but is still up more than 8.5% this week. According to coinglass.com, liquidations of future short positions in Bitcoin have surged due to the recent surge in prices.
The recent price rally and subsequent surge in margining rates comes on the back of a continued surge in new Bitcoin investors. At least, this is the conclusion we can draw from analyzing the trend of his BTC ownership distribution across wallets, the number of wallets with low BTC balances (presumably retail investors) is growing rapidly.
Can New Investors Keep Bitcoin Price Rising?
The number of Bitcoin wallet addresses with non-zero balances has recently surpassed 44 million for the first time, according to crypto data analytics platform Glassnode. This growth is, of course, driven by a surge in the number of wallets holding small BTC balances. So-called “plankton” addresses under 0.01 BTC recently surpassed 32.6 million, a record high.
The number of so-called “shrimp” addresses, defined as holding less than 1 BTC, also recently hit a record high of over 43.2 million. This suggests an influx of new investors, which may have fueled the recent rally seen in Bitcoin.
Historically, during Bitcoin bear markets, the balance of Bitcoin assets is likely concentrated in the hands of high-conviction investors. When this concentration of BTC wealth begins to reverse, this has traditionally been an early indicator that a new Bitcoin bull market has begun and new investors are back in the market. Glassnode’s realization can be seen in the HODL ratio indicator.
The RHODL ratio is the ratio of a coin that is 1 week old to a coin that is 1-2 years old (that is, when the coin last moved). A rise indicates more coins are moving, suggesting an influx of new buyers. If it drops, it means that coins are accumulating in your wallet and you no longer intend to sell them. This usually happens in a bear market when an investor with a weak hand sells to an investor with a strong hand.
As seen in the chart above, the recent bottoming out and a temporary reversal in the balance of BTC assets suggests that Bitcoin’s bottom may be in this cycle. hopes the influx of new investors will continue to push prices higher in the face of growing macro headwinds.