Negative Market Sentiment for Ethereum [ETH] and bitcoin [BTC] Derivatives caused funding rates to remain negative. While both the prices took a major hit, the smaller traders followed the ritual of selling.
Now, could this “potential” squeeze post-squeeze provide opportunities for patient (long) traders?
deep wounds
Funding rates for BTC and ETH have been negative for derivatives traders for quite some time now. Furthermore, derivatives prices have kept funding rates generally below zero since May. Ergo, reflects the overall sentiment of traders and how they view future market conditions.
But can it indicate a potential short-term bull signal for traders? correct.
Annual funding rate spread among B T c And ETH The push was pushed to a new all-time high (ATH) of 77%, according to data from Glassnode. The graph below showed the same.
However, the short trades seem to be focused on ETH rather than BTC given its merge season. In this regard, glassnode couple,
“This indicates that there is a huge shortage of traders ETH relative to B T cPossible speculation/hedging for an upcoming merge.”
This means reducing your exposure exposure to ETH by going short perpetual futures. In fact, the ETH funding rate has dropped to its most negative level since July 2021.
The difference in sentiment for the two major crypto assets appears to pivot in anticipation of an upcoming merge. The event, previously known as Ethereum 2.0, will take place when the Proof-of-Work (PoW) Ethereum mainnet will merge with the Proof-of-Stake (PoS) beacon chain.
Additionally, a report by Kaiko found that ether perpetual futures traded at more than 7x the volume of the spot market. This is on a four-fold increase from November 2021.
opportunity arises
However, looking at the previous scenarios, a ‘short-squeeze’ could see a potential uptake for the flagship token. Every time funding fell to the downside during the past month, prices rose.
Thus, funding rates moved towards positive territory. Ergo, long traders take advantage of the short positions left.
Nonetheless, social sentiment is forming a blanket around Ethereum. According to LunarCrush, Ethereum’s Social Activity ACCELERATED in the last three months. Even as it continued to touch new heights.
negative to positive
On the other hand, funding rates for the largest cryptocurrency BTC flipped positive, although the (positive) rate may not be significant enough.
Nevertheless, long traders pay a premium to short traders for holding their positions at press time.
Only one question remains – could there be more room for bitcoin to grow? Well, funding rates have been pretty positive lately. Notably, when the price dropped – BTC lost over 10% in just 24 hours after the CPI was announced.