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Traders participating in the perpetual futures market linked to the BNB token are exhibiting a growing bearish sentiment amidst a difficult landscape for this troubled cryptocurrency across various aspects.
Coinglass data reveals a significant shift in the open interest and volume-weighted funding rates within perpetual futures, dropping to a record low of -0.18%. This marks the lowest point observed since late April. The data highlights the dominance of short positions, signaling a prevailing sentiment that anticipates a price decline. Surprisingly, those holding bearish bets are even willing to pay long positions to ensure the continuation of their pessimistic outlook. It's worth noting that funding rates are assessed every eight hours.
"BNB is being heavily shorted," stated Huf, the pseudonymous co-founder of Pear Protocol, alluding to the remarkably pessimistic funding rates.
"The sentiment has worsened due to the recent high-profile staff exits, inconsistencies related to BCH withdrawals from Binance.US and the pending Department of Justice case against Binance's CEO Changpeng "CZ" Zhao," Huf elaborated. BNB serves as the token of the BNB ecosystem, established by Binance, and crypto traders commonly associate the token's performance with the exchange's overall success.
Binance, in response to increasing regulatory challenges across the globe, has undertaken significant workforce reductions, with over 1,000 employees being laid off in the past few weeks. Furthermore, at the beginning of this month, three high-ranking executives resigned from their positions, attributing their departures to concerns regarding CZ's management of the Department of Justice's investigation into potential money laundering activities.
During the weekend, CZ made efforts to ease market concerns by referring to the recent job cuts as involuntary terminations and disregarding the layoff numbers reported by the media as FUD (fear, uncertainty, and doubt).
"We are still hiring," CZ announced in a tweet on Saturday.
However, the market continues to be on edge, as indicated by the significantly negative funding rates, causing certain analysts to express concerns about potential further negative developments.
"24h APR -92% ~ Typically, these readings precede some bad news for Binance Wonder what's coming?" pseudonymous trader Skew tweeted on Sunday.
The prevailing negative funding rate suggests that traders are actively assessing the extent to which Ripple's recent favorable ruling in a U.S. court could potentially aid Binance in its ongoing battle with the U.S. Securities and Exchange Commission.
In a ruling that had been eagerly awaited, the District Court for the Southern District of New York declared last week that XRP, the cryptocurrency at the center of the SEC's case against Ripple Labs for securities law violations, does not qualify as a security when sold to individual investors via centralized exchanges. However, the court emphasized that when XRP is offered to institutional investors, it will be treated as a security. This decision came after the SEC had charged both Binance and Coinbase in early June for facilitating the trading of unregistered securities on their platforms.
Potential for short squeeze
A short squeeze refers to a rapid upward surge in prices caused by pessimistic traders abandoning their bearish positions. This phenomenon typically arises when the market experiences an unusually high level of bearish activity, as seen in the case of BNB perpetual futures. In such scenarios, even a slight increase in price can trigger a rush among bears and short sellers to close their positions, leading to a further escalation in prices.
A potential breakthrough of $265 might trigger a significant reduction in short positions, suggests Per Skew.
"BNB [looks] Weak as long as price trades below $265, back above there, I could see some illiquid short covering rally. Else eventually below the monthly range low $218," Skew tweeted.
As of the latest update from CoinCryptoUs, BNB is currently exchanging hands at $242.
