The BNB token, associated with the embattled cryptocurrency exchange Binance, is experiencing significant bearish sentiment as traders heavily short the token in the perpetual futures market. Data from Coinglass reveals that open interest and volume-weighted funding rates in BNB perpetual futures have dropped to -0.18%, the lowest level since late April. This indicates that short positions, which profit from price drops, are dominant, with short sellers even paying longs to keep their bearish bets open. Funding rates are charged every eight hours.
“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,” said Huf, the pseudonymous co-founder of Pear Protocol. BNB is the native token of the Binance ecosystem, and its value is closely tied to the fortunes of the exchange.
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Binance has been facing regulatory pressures globally and has recently laid off over 1,000 employees. In addition, three senior officials resigned, citing concerns over CZ’s handling of the Department of Justice investigation into possible money laundering. CZ has attempted to reassure the market by characterizing the layoffs as involuntary terminations and dismissing media reports about the extent of the layoffs as FUD (fear, uncertainty, and doubt).
Despite CZ’s statements, the market remains nervous, as indicated by the deeply negative funding rates. Some observers are anticipating more bad news for Binance in the near future. Pseudonymous trader Skew tweeted, “24h APR -92% ~ Typically, these readings precede some bad news for Binance. Wonder what’s coming?”
The negative funding rate also reflects traders’ uncertainty regarding whether the recent U.S. court ruling favoring Ripple will benefit Binance in its legal battle against the U.S. Securities and Exchange Commission (SEC). In a highly anticipated ruling, the District Court for the Southern District of New York declared that XRP is not a security when offered to individuals through centralized exchanges, but it is treated as one when offered to institutional investors. Binance and Coinbase were previously charged by the SEC for offering unregistered securities on their platforms.
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There is potential for a short squeeze in the BNB market, which occurs when bears quickly abandon their bearish positions, resulting in a rapid upward price movement. Skew suggests that if BNB rises above $265, short sellers may engage in covering their positions, leading to a rally. However, Skew notes that BNB appears weak as long as the price remains below $265, potentially falling below the monthly range low of $218.
At the time of writing, BNB is trading at $242, according to CoinDesk data.
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Written by Agbo Obinnaya
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