Bitcoin Funding Rate Turns Highly Positive, Long Squeeze In The Making?
Data shows the Bitcoin funding rate has increased to a relatively high positive value recently, something that could lead to a long squeeze in the market.
Bitcoin Funding Rate Becomes Positive As Open Interest Rises Up
As pointed out by an analyst in a CryptoQuant post, the BTC funding rate has a positive value at the moment.
The “open interest” is an indicator that measures the total amount of positions currently open in the Bitcoin futures market.
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Related Reading | When Will The Extended Stretch Of Extreme Fear In Crypto End?
On the other hand, low values of the open interest can result in lesser volatility in the BTC market as there isn’t much leverage involved in the futures market.
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As you can see in the above graph, the Bitcoin open interest has observed a rise in recent days. This could mean that the crypto may face higher volatility in the coming days.
Read our comparison of 50 different crypto casinos. Find out who has most generous bonuses, best UX, knowledgeable customer support and best provably fair games.Another indicator, the “funding rate,” measures the periodic fee that traders on derivatives exchanges pay each other to hold onto their positions. This metric tells us how the open interest is divided between the long and short traders at the moment.
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The below chart shows how this indicator’s value has changed during the past seven days.
From the graph, it’s apparent that the Bitcoin funding rate has a relatively high positive value currently. This means that there are a higher number of longs present in the market right now.
Since long traders are paying a premium to keep their positions (which is why the rate is positive), the overall market sentiment is leaning towards bullish.
However, with the high open interest values, it’s possible that any large swing in the price can cause what’s called a “long squeeze,” which is an event where mass liquidations of long positions cascade together and push the price further down.
BTC Price
At the time of writing, Bitcoin’s price floats around $20.9k, down 2% in the last week. Over the past month, the crypto has lost 5% in value.
