The on-chain data indicates that the Bitcoin funding rates are rising again. This suggests that a long squeeze could be coming for crypto.
Bitcoin Funding Rates Have Relatively High Positive Valuation
According to a CryptoQaunt analyst, current positive funding rates might indicate that prices could see a decrease soon.
The “funding rate” is an indicator that measures the periodic fee that Bitcoin futures traders are paying each other.
If this metric has a value greater than zero it indicates that long traders pay a premium to short-term investors in order to keep their positions. This suggests bullish sentiment at the moment.
Negative values on the indicator, however, indicate that bearish sentiments are more prevalent as longs are currently paying longer.
Here is the chart showing the current trend of Bitcoin funding rates, 72-hour MA in 2022.
The value of this metric seems to have risen recently. Source: CryptoQuant| Source: CryptoQuant
The graph above shows that the quant marked points at which Bitcoin funding rates hit a high point in recent months.
The price of crypto seems to have fallen sharply after the occurrence of relatively high funding rates.
Related reading: Five months of fear: When does the Bitcoin Carnage cease?| Five Months Of Fear: When Will The Bitcoin Carnage End?
The long squeeze can be described as a large-scale leverage flush in which long liquidations follow each other. A squeeze like this can drive the market down sharply and is evident in the examples above.
However, short squeezes can increase price. According to the analyst, if there are any significant price increases, the Bitcoin market will need negative funding rates.
Longs still dominate the futures market. To reduce the funding rate, it will be necessary to squeeze the shorts.
Similar Reading: Bitcoin Institutional Outflows near One-Year Maximums. More Downside Coming| Bitcoin Institutional Outflows Near One-Year Highs, More Downside Coming?
However, this could also mean that the cryptocurrency price may take another tumble just as it did earlier in the year.
BTC Prices
At the time of writing, Bitcoin’s price floats around $39.5k, down 1% in the last seven days. In the past month, crypto lost 15%.
Below chart displays the trends in the value of the coin during the last five working days.
Source: BTCUSD on TradngView| Source: BTCUSD on TradngView
Bitcoin’s price is stuck at $40k, despite it being in trouble for months.
Unsplash.com's featured image. Charts by TradingView.com. CryptoQuant.com chart.