Bitcoin Funding Rates At 6-Month High, Long Squeeze Alert?
On-chain knowledge exhibits the Bitcoin funding charges have now hit a 6-month excessive, one thing that might result in an extended squeeze out there.
Bitcoin Funding Charges At present Have A Extremely Optimistic Worth
As identified by an analyst in a CryptoQuant post, BTC funding charges have surged as much as the very best for the final six months.
The “funding price” is an indicator that measures the periodic payment that merchants within the Bitcoin futures market need to pay one another.
When the worth of this metric is bigger than zero, it means lengthy merchants are paying shorts to carry onto their positions proper now. Such a development exhibits a bullish sentiment is extra dominant out there at the moment.
Alternatively, the funding price being constructive suggests there are extra shorts out there in the meanwhile as they’re paying a payment to the longs.
Now, here’s a chart that exhibits the development within the Bitcoin funding charges over the 12 months 2022 to this point:
The worth of the metric appears to have spiked up over the previous day | Supply: CryptoQuant
As you may see within the above graph, the Bitcoin funding price is constructive proper now, and has been on the rise in current days.
Through the previous day, the indicator has hit its highest worth for the final six months, suggesting there are a considerable amount of longs open within the futures market proper now.
The final time such excessive values of the metric had been noticed was again in Might, shortly after which the value of the crypto crashed from practically $40k all the best way right down to $30k.
A “lengthy squeeze” happened out there then. A squeeze is an occasion the place a considerable amount of fast liquidations happen in an overleveraged atmosphere.
In an extended squeeze, a pointy swing downwards within the worth (when funding charges are constructive) liquidates numerous lengthy contracts, which solely amplifies this downswing additional.
This amplified plunge then liquidates much more contracts, and so forth. On this approach, liquidations can cascade collectively and make the value take a pointy plummet.
Because the Bitcoin funding charges are at excessive constructive values at the moment, an extended squeeze is a risk, provided that the value observes a pointy sufficient lower.
On the time of writing, Bitcoin’s worth floats round $20.7k, up 1% within the final week.
Seems to be like the worth of the crypto has taken successful over the past 24 hours | Supply: BTCUSD on TradingView
Featured picture from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com