On-chain data shows that the bitcoin funding rate is still at a relatively high positive price, indicating that the crypto could see further downside in the short term.
The bitcoin funding rate has been on a positive note over the past few days
As reported by an analyst in a Cryptoquant post, the current funding rate suggests that the price is currently in a fresh decline.
The “funding rate” is an indicator that measures the periodic fee that traders in the bitcoin futures market have to pay to each other.
When the value of this metric is above zero, it means that long traders are currently paying a premium to short traders to maintain their positions. Such values indicate that the bullish sentiment in the market is more dominant at this point in time.
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On the other hand, negative values of the indicator mean that most of the sentiment is bearish right now as the shorts are currently paying off the longs.
Now, here is a chart that shows the trend in bitcoin funding rates over the past six months:
The value of the metric seems to have been positive in the past week | Source: CryptoQuant
As you can see in the graph above, whenever the bitcoin funding rate has reached a relatively high positive value during the past few months, the price of crypto has generally seen a decline. Similarly, the value of BTC has seen some upward movement as a result of negative spikes.
Here’s what’s happening: High positive values mean the market is accumulating for a long time. So, a significant enough sudden drop could liquidate a lot of these, which could drive the price further down, and thus eliminate even longer positions. A phenomenon where 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 $23k, the funding rate again hit a positive peak and the price subsequently went down. However, the current price of the indicator still looks quite positive, which could mean that the decline is still on.
btc price
At the time of writing, bitcoin price is floating around $22.7k, up 6% over the past seven days. In the past month, the value of crypto has risen by 8%.
The chart below shows the coin’s price trend over the past five days.
Looks like the value of the crypto has been sliding down over the last few days | Source: BTCUSD on TradingView
Featured image from Brent Jones on Unsplash.com, charts from TradingView.com, CryptoQuant.com