As Shiba Inu (SHIB) continues to shake up the cryptocurrency market, funding rates on multiple exchanges, including Binance, have reached negative levels. While it may sound like a bad thing, it could just be a reflection of the current market sentiment, according to analysts. Here’s what you need to know…
What does negative funding rate mean?
Funding rates are payments made by both bears and bulls to offset the price of a perpetual futures contract and bring it closer to the value of the underlying cryptocurrency, or just the spot price. The funding rate is an essential tool for the proper functioning of perpetual contracts.
Cryptocurrency traders and investors can use funding rates to determine current market sentiment. Generally, positive funding means that most investors are bullish and funding is mostly geared towards short-term investors. Negative funding means that bears are funding long positions to open more positions.
With Shiba Inu (SHIB) reaching a new ATH and facing almost 100% growth in the last three days, most traders consider SHIB to be leveraged and overbought and therefore start closing their long positions. .
Effects on SHIB price
We can already see the repercussions of such an effect as the funding rates have reached negative values. Currently, SHIB has withdrawn 10% in the last four hours. Additional selling pressure could come from the overall negative sentiment in the market as Bitcoin (BTC) pulls back from the previous ATH and drops below $60,000.
The retracement zone for SHIB is most likely linked to the psychological $0.00006 resistance that has yet to be surpassed by the meme-based cryptocurrency. The pullback in SHIB has not accelerated yet, indicating that traders are willing to stay in SHIB rather than panic sell.
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