On-chain data shows that Bitcoin funding rates are once again on the rise, suggesting that another prolonged squeeze may be in store for the cryptocurrency.
Bitcoin Funding Prices Show Relatively High Positive Value
As explained by an analyst at CryptoQaunt mailThe current positive funding rates may mean that the price may see a decrease soon.
The “Funding rate“It is an index that measures the periodic fees that bitcoin futures traders pay each other.
When the value of this metric is greater than zero, it means that long-term traders are paying a premium to short investors to hold their positions for the time being. Thus, this trend indicates that the sentiment of the majority is bullish for the time being.
On the other hand, negative values of the indicator indicate that the downtrend is more dominant as short positions are driving long positions at the moment.
Now, here is a chart showing the trend in Bitcoin funding prices (72-hour moving average) in 2022 so far:
Looks like the value of the metric has surged up recently | Source: CryptoQuant
As you can see in the chart above, the quantity marked the points at which Bitcoin funding rates peaked over the past few months.
It appears that shortly after a relatively high positive funding rate occurred, the price of the cryptocurrency noticed a sharp drop.
Related reading | Five Months of Fear: When Will the Bitcoin Massacre End?
Long squeeze is a large leverage flow event where long liquidations cascade together. Such pressure can lead to a sharp drop in price and it seems that the above cases were characterized by such pressure.
a short squeeze, on the contrary, the price can instead be raised. So the analyst argues that the bitcoin market will require negative funding rates if the price is to notice any real improvements.
However, with long positions currently dominating the futures market, a long squeeze should occur to lower the funding rate and build short positions.
But with that said, the price of the cryptocurrency may also suffer another drop just like the cases that occurred earlier in the year.
At the time of writing this report, Bitcoin price It is floating around $39.5K, down 1% in the past seven days. Over the past month, the cryptocurrency has lost 15% of its value.
The chart below shows the currency price trend over the past five days.
The price of BTC seems to have observed a sharp rise in the past twenty-four hours | Source: BTCUSD on TradngView
Bitcoin has been struggling for several months and the price has recently shown no signs of any real recovery as it is still stuck below the $40K level.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com