Bitcoin saw a rise in funding rates last week, and here's what you need to know about it.

Key points:

• Key U.S. inflation data for October is due on Nov. 10, while jobless claims and several speeches from Fed officials could also weigh on volatility in risk assets.
• As BTC approached the upper end of the range, Binance’s FTX news appeared to dampen sentiment significantly, ultimately costing Bitcoin the $21,000 mark.
• Any lower-than-expected CPI reading could be positive for cryptocurrencies and risk assets, as it theoretically increases the likelihood that the Fed will cancel rate hikes early.
• Currently, funding rates are very high. Traders are betting on higher prices and are willing to pay a lot of interest.
• With the Fear & Greed index, optimism proved untenable at 40/100 as the market retraced into the new week, and as of November 7 we were at 33/100 - firmly in the "fear" range.

Bitcoin starts the second week of November with the famous FUD battle - how will Bitcoin's price action react?

The largest cryptocurrency closed the week just under $21,000 on Nov. 6 — an impressive multi-week high — but remained locked in a sticky trading range.

Despite hitting highs near $21,500 over the past week, there has been no catalyst to break the market's status quo, but the chances for the week ahead are as great as any.

Key U.S. inflation data for October is due on Nov. 10, while jobless claims and several speeches from Fed officials could also weigh on volatility in risk assets.

The unexpected shift in the cryptocurrency space came in the form of turmoil at exchanges FTX, Alameda Research, and Binance.

Liquidity concerns escalated as Binance CEO Changpeng Zhao unveiled a plan to sell the entirety of his platform’s FTX tokens.

Bitcoin reacted overnight in line with market sentiment, but will this crash prove to be more than just classic crypto FUD?

Btcman looks at some of the key factors influencing BTC price action in the coming days.

FTX concerns disrupt weekly earnings

Despite falling to a weekly close, BTC/USD still managed to record its highest weekly candle close since mid-September.

Data from TradingView shows that Bitstamp was capped at $20,900 for the week ended Nov. 6.

With this, Bitcoin is defending its trading range and avoiding a clear breakout of its current paradigm - which has been oscillating between $19,000 and $22,800 since August.

As it approached the upper end of the range, Binance’s FTX news appeared to dampen sentiment significantly, ultimately costing Bitcoin the $21,000 mark.

“Binance received approximately $2.1 billion in cash equivalents (BUSD and FTT) as part of Binance’s exit of its stake in FTX last year,” Binance CEO Changpeng Zhao (aka “CZ”) tweeted.

“Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books.”

Zhao added that it would take “months” to sell his FTX holdings on Binance, acknowledging that the market could be affected along the way.

Meanwhile, FTX CEO Sam Bankman-Fried cited what he called “unfounded rumors” about liquidity issues in his own post.

"We thank those who stayed, and when this is over, we will welcome others back," he wrote an upbeat post to his followers overnight.

The market reaction has been less positive so far; looking at the top 10 cryptocurrencies by market cap, some coins have lost 24 hours, approaching 10% at the time of writing.

Now is the time for Bitcoin traders to capitalize on a one-week retracement that they believe should lead to further gains.

"Lost support on shorter time frames. Nice little retreat. Will try long again if next support is found," popular trading account IncomeSharks wrote in an update.

Another article focuses on potential cross-encryption gains.

"Total market capitalization looks great on a daily basis. Whether it's a bull or a bear market, I think enough people are still holding cash to raise as much as $1.5 trillion," it said.

Michaël van de Poppe, founder, and CEO of trading firm Eight, also said he would be looking for “buy the dip” opportunities in cryptocurrencies in the near term.

A classic counter-argument comes from Cryptoman Il Capo, who believes that $21,500 will mark the top of a downtrend that will continue.

“Seeing whales wanting to fulfill requests at 21500. A very fast cheat pump to this level would be the perfect end to the party. ETH up to 1700,” reads one tweet.

Attention to the CPI and U.S. middle term

The Federal Reserve dominated the performance of crypto assets in the last week of October due to its decision to raise interest rates by another 0.75%.

While this is being implemented, markets will be focusing on another key data this week - the consumer price index (CPI) data for October.

Annual inflation was 7.9 percent, down 0.3 percent from September, according to estimates by economists polled by Bloomberg.

Any lower-than-expected CPI reading could be positive for cryptocurrencies and risk assets, as it theoretically increases the likelihood that the Fed will cancel rate hikes early.

However, before the CPI and jobless claims, the U.S. midterm elections need to be addressed -- a potential source of volatility in itself.

"Personally, I'm in no rush to start buying," popular social media personality @CryptoGodJohn told followers.

“CZ vs SBF drama, Midterm elections Tuesday, CPI Thursday. This will be the biggest week of crypto that will set the tune for the end of the year.”

Announcing a rate hike was a bit of a misnomer, as it sparked volatility that reversed within a few days.

Meanwhile, commentator Capital Hungry warned about the impact of stronger CPI inflation:

“If US CPI this week is still high we are going to see that upside on gold reversed, USD strength back and Equities bears back in play.”

As of this writing, the U.S. dollar index (DXY) has regained ground after a sharp daily loss of 2% on Nov. 4.

Funding rates are hot

As a warning sign for bulls, especially late-stage bulls, Bitcoin funding rates on derivatives exchanges are rising.

As noted by Maartunn, a contributor to the on-chain analytics platform CryptoQuant, funding rates are now at their highest level in six months.

Funding rates are a mechanism used in perpetual contracts to keep their prices close to Bitcoin’s spot price.

The very positive funding rate indicates that the market is expecting BTC/USD to rise, and traders are paying for the privilege of more and more BTC.

This effect can be detrimental, as a drop in price will result in the liquidation of a large number of overly bullish positions.

“Currently funding rates are very high. Traders are betting on higher prices and are willing to pay a lot of interest,” Maartunn explained along with CryptoQuant data.

“That doesn't have to be bearish perse, but when price start to move against them they might be forced to get out their position or it will be liquidated.”

As Btcman reported, last month saw a record liquidation in 2022 as the price of Bitcoin rallied to $21,000.

Maartunn added that the funding "is something to watch in the coming days".

Miners lack difficulty adjustment

Bitcoin network fundamentals are still in an interesting state, if not outright bullish.

The latest data from on-chain monitoring resource BTC.com confirms that network difficulty dropped by 0.2% on Nov. 7, well below previous expectations.

The results have had an impact on miners, whose profits plummeted even as the hash rate hit an all-time high.

The significant reduction in difficulty will help level the playing field for some, while its absence will stress some players.

Sam Rule, a market analyst at UTXO Management, revealed last week that even Bitcoin’s largest public miner is “seriously underperforming BTC” in the current environment.

However, as Btcman reported, the combination of high hash rate and low miner profitability is one possible reason for the belief that Bitcoin is undervalued.

The Bitcoin ruler moved further into its "cheap" territory this month after seeing rare lows.

Sentiment gauges hit three-month highs

Crypto market sentiment may not be all doom and gloom.

Bitcoin shrugged off the cold shoulder at its highest level since September, according to the Crypto Fear and Greed Index.

Fear & Greed uses a basket of factors to measure sentiment on a standardized scale of 0-100 and provides different labels - extreme greed, greed, neutral, fear and extreme fear - to categorize them, reaching the highest level since the weekend in mid-August Level.

Optimism proved untenable at 40/100 as the market retraced into the new week, and as of November 7 we were at 33/100 - firmly in the "fear" range.