Bitcoin Funding Rate Turns Dark Red… What Does This Mean?

Bitcoin Funding Rate Turns Dark Red… What Does This Mean?

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Answer Bitcoin Funding Rate Turns Dark Red… What Does This Mean?

Data shows that Bitcoin funding rates have sunk into deep negative values, something that could pave the way for a short squeeze in the market.

Bitcoin Funding Turns Red:

One analyst at the platform noted:CryptoQuant“Bitcoin has seen a slight rise in the short term due to funding rates.

Funding rate: It is an indicator that measures the cyclical fees that long-term and short-term Bitcoin futures traders exchange between themselves.

When the value of this metric is positive, it means that the long positions are paying the fees to the short positions at the moment to hold their positions.

As there are more long positions in the market, this trend shows that the uptrend is prevalent in the futures market at the moment.

Read:A cryptocurrency exchange keeps users’ passwords in an insecure way

On the other hand, negative funding rate values ​​indicate that there are more short positions in the market at the moment, and the general sentiment is bearish for the time being.

The chart below shows the trend in bitcoin funding prices for all trading platforms over the past week.

As you can see in the chart above, the Bitcoin funding rate has declined over the past day and is relatively negative at the moment.

This means that futures traders are stacking short positions in the market, and a similar trend occurred just two days ago as the chart shows.

At that time, the price reversed sharply upwards and caused a short squeeze, amplifying the price swing.

Short squeeze occurs when the mass liquidation of short traders occurs due to a sudden sharp swing in the price.

Large liquidations move bitcoin in the direction of a reversal, eliminating more leverage positions.

In this way, the filters are chained together and the event is called a compression.

Since short positions are accumulating in the bitcoin futures market at the moment, it is likely that a swing in the price will cause such pressure, causing some rise in the price of the cryptocurrency.

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But like the past few days, these liquidations are likely to lead to an increase only in the short term.
At the time of writing this article, bitcoin price is trading around $19,000, down 10% from last week.

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