On-chain knowledge reveals the Bitcoin funding charges have now hit a 6-month excessive, one thing that would result in a protracted squeeze out there.
Bitcoin Funding Rates Currently Have A Highly Positive Value
As identified by an analyst in a CryptoQuant post, BTC funding charges have surged as much as the best for the final six months.
The “funding rate” is an indicator that measures the periodic charge 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 reveals a bullish sentiment is extra dominant out there at present.
On the opposite hand, the funding fee being constructive suggests there are extra shorts out there in the mean time as they’re paying a charge to the longs.
Now, here’s a chart that reveals the development within the Bitcoin funding charges over the yr 2022 thus far:
The worth of the metric appears to have spiked up over the previous day | Source: CryptoQuant
As you’ll be able to see within the above graph, the Bitcoin funding fee is constructive proper now, and has been on the rise in current days.
During 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 have been noticed was again in May, shortly after which the value of the crypto crashed from practically $40k all the way in which right down to $30k.
A “long squeeze” befell out there then. A squeeze is an occasion the place a considerable amount of speedy liquidations happen in an overleveraged setting.
In a protracted squeeze, a pointy swing downwards within the value (when funding charges are constructive) liquidates a lot of lengthy contracts, which solely amplifies this downswing additional.
This amplified plunge then liquidates much more contracts, and so forth. In this fashion, liquidations can cascade collectively and make the value take a pointy plummet.
As the Bitcoin funding charges are at excessive constructive values at present, a protracted squeeze is a chance, on condition that the value observes a pointy sufficient lower.
BTC Price
At the time of writing, Bitcoin’s price floats round $20.7k, up 1% within the final week.
Looks like the worth of the crypto has taken a success over the last 24 hours | Source: BTCUSD on TradingView
Featured picture from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com
