On-chain data shows that Bitcoin funding rates have dropped to negative values, which could lead to a short-term squeeze in the market. Details are here.
As one analyst noted in a CryptoQuant post, Bitcoin could see a slight increase in the short term due to current funding rates.
“Funding rate”is essentially an indicator that traders use to assess market sentiment.
Bitcoin futures exchanges use a system called “funding” to maintain balance in the market. According to the system in question, when buyers (i.e. long positions) are dominant in the market, the funding rate increases, and when the opposite is true, there is a decrease. When the value of this metric is positive, longs pay a premium to shorts to hold their positions.
The current negative turn of the funding rate indicates that the majority of the market is shorting for Bitcoin, revealing the prevailing fear. Negative values of the ratio indicate that the overall mood is in a downtrend. The chart below shows the trend in Bitcoin funding rates across all exchanges over the past week.
As you can see in the chart above, the Bitcoin funding rate has dropped over the past day and is currently holding a relatively negative value. This means that futures traders are accumulating short positions in the market.
As the chart shows, a similar trend occurred a few days ago. At that time the price reversed sharply and short-squeeze (short position compression), which further strengthened the price volatility. When mass liquidations occur in short positions due to a sudden sharp fluctuation in price “short-squeeze” it occurs. Large liquidations move Bitcoin further in the direction of the reversal, causing the market to clear leverage. In this way, the purges follow each other, and the “squeezeIt’s called ‘.
As shorts are piling up in the BTC futures market right now, it seems likely that a surge in price could cause such compression and bring some bullishness for crypto.
However, it is worth noting that, like a few days ago, such liquidations are only likely to generate an increase in the short term.
Koinfinans.com As we reported, the price of Bitcoin is trading around $19.2k, down 9% compared to last week.
You can check the price movements here.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, KoinFinans and the author of this content cannot be held responsible for personal investment decisions.