On-chain data shows that Bitcoin’s funding rate is still in a relatively high positive value, suggesting that the crypto could see a further decline in the near term.
Bitcoin funding rate has been in a positive value for the past few days
As one analyst pointed out in a CryptoQuant post, the current funding rate suggests that the price is in a further decline right now.
The “funding rate” is an indicator that measures the periodic fee that traders in the Bitcoin futures market must pay each other.
When the value of this metric is above zero, it means that long traders are paying short traders a premium to hold their positions. Such values indicate that a bullish sentiment is more dominant in the market at the moment.
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On the other hand, negative values of the indicator imply that the majority sentiment is bearish at the moment, as the shorts are currently paying the longs.
Now, here is a chart showing the trend in Bitcoin funding rates over the last six months:
The value of the metric seems to have been positive in the last week | Source: CryptoQuant
As you can see from the chart above, whenever Bitcoin’s funding rate has reached a relatively high positive value over the past few months, the price of the crypto has generally seen a decline not long after. Similarly, negative spikes have resulted in the value of BTC experiencing an uptrend.
Here’s what’s going on here: High positive values mean longs are piling up in the market. Therefore, a significant enough flash drop can liquidate many of these, which can end up driving the price even lower and thus liquidating even more long positions. Such an event where the liquidations cascade together is called a “squeeze” (or in this case, a long squeeze).
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A few days ago, when the price of the crypto was above $23,000, the funding rate reached a positive peak again, and subsequently the price dropped. However, the current value of the indicator still appears to be quite positive, which may mean that the decline is still continuing.
At the time of writing, the price of Bitcoin is hovering around $22,700, up 6% over the past seven days. Over the last month, the crypto has gained 8% in value.
The chart below shows the trend in the price of the coin for the past five days.
It seems that the value of crypto has been falling in recent days | Source: BTCUSD on TradingView Featured Image by Brent Jones on Unsplash.com, Charts from TradingView.com, CryptoQuant.com
This post Bitcoin Funding Rate Still Positive, More Drop Soon?
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