In the past two days, Bitcoin funding rates on margin positions have skyrocketed to their highest levels in over two weeks, according to data from the OKX and dYdX cryptocurrency exchanges and presented by the cryptocurrency analytics website coinglass.com. This information was obtained from the cryptocurrency exchanges. If funding rates are positive, this may indicate that speculators are bullish and that long traders are supporting short traders at the expense of their capital.
The recent price increase of Bitcoin, which saw it reach fresh eight-month highs of $25,270 on Thursday after having been as low as the $21,300s earlier this week, has caused an increase in the rates at which Bitcoin is being funded, which has led to a surge in overall interest rates. Since then, the price of bitcoin has retreated to the top $23,000s, but it is still up more than 8.5% for the week. According to coinglass.com, the recent climb in the price of Bitcoin has also led to an increase in the number of people liquidating their short positions in Bitcoin futures.
The current climb in price, as well as the following increase in the margin financing rate, have occurred against the backdrop of an ongoing increase in the number of people investing in Bitcoin. At the very least, this is the conclusion that can be drawn from analyzing trends in the distribution of Bitcoin ownership among wallets. The number of wallets with a small Bitcoin balance (presumably retail investors) is expanding at a rapid clip, which suggests that this is the conclusion that should be drawn.
The number of Bitcoin wallet addresses that have a balance greater than zero just surpassed 44 million for the first time, as reported by the crypto data analytics platform Glassnode. This expansion has been fueled, as should come as no surprise, by a rise in the number of wallets holding a meager sum of Bitcoin. Recently, the number of addresses with less than 0.01 BTC, known as “plankton” addresses, reached an all-time high exceeding 32.6 million.
In addition, the number of addresses known as “shrimp,” which are defined as holding less than one bitcoin, just reached a new all-time high that is above 43.2 million. This shows that there has been an influx of new investors, which is most certainly contributing to Bitcoin’s recent advances and helping to propel them.
During Bitcoin bear markets, historically speaking, the majority of BTC wealth has accumulated in the hands of a smaller number of investors who hold a higher level of conviction. When this BTC wealth concentration begins to shift in the opposite direction, it is often taken as an early indicator that a new Bitcoin bull market is underway and that unique investors are once again returning to the market. This pattern is reflected in the “realized HODL ratio” indicator that Glassnode provides.
The RHODL Ratio compares coins that are one week old to coins that are between one and two years old (i.e., when the coins last moved). When it goes up, this indicates that more coins are being traded, which in turn indicates an increase in the number of new buyers. When it goes down, it indicates that coins are being accumulated in wallets that are no longer willing to sell. This is something that typically occurs during a bear market when investors with weaker hands sell to investors with stronger hands.
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