Bitcoin price was one of the things to watch over the past week, Jumping by almost 10% In less than seven days. According to the latest on-chain data, the bears may be in for a longer ride as funding rates drop to extremely low levels.
BTC is at risk of a short squeeze
In a new Quicktake post on the CryptoQuant platform, cryptocurrency analyst Gaah open Bitcoin funding rates have seen a sharp decline over the past few days, as the price builds the foundation for a sustainable recovery. The relevant indicator here is the Funding Price Barometer, which tracks the periodic fees exchanged between traders in the derivatives market for a given cryptocurrency (BTC, in this case).
A positive funding rate usually means that long traders (investors with long positions) pay a fee to short traders (investors with short positions) in the derivatives market. On the other hand, when the funding rate is negative (as seen in the current scenario), it means that periodic fees are paid by short traders to long traders.
According to data from CryptoQuant, the Bitcoin funding price gauge fell to around -0.011, its lowest level since early February, when BTC price fell towards the $60,000 level. “The market is very ‘easy’ and straightforward to trade on the sell side,” Gaah wrote in a Quicktake post.
From a chain perspective, a Negative financing rate signals The majority of the market – are bears – are betting against the price of Bitcoin. However, extremely negative funding rates have historically proven to be a “contrarian signal,” meaning that the asset price tends to move in the opposite direction to the crowd (bears, in this scenario).
As prices begin to rise unexpectedly, many traders may be forced to close their overly leveraged short positions, resulting in a further increase in the value of the asset in a phenomenon known as a “short squeeze.” As cryptocurrency analyst Gaah pointed out in his Quicktake post, the chances of a short squeeze are increasing by the day.
“Caution is required when establishing positions in the current range, as it represents a buy order zone,” the market expert concluded.
Bitcoin price overview
After a fairly positive performance over the past week, Bitcoin price action has slowed somewhat this weekend – as we have seen on most weekends over the past year. As of this writing, the leading cryptocurrency is valued at $73,425, reflecting the lack of significant movement over the past 24 hours.
Related reading: The analyst says XRP could rise near $20 after a breakout signal appeared in 2017
