On-chain knowledge exhibits the Bitcoin funding charges have now hit a 6-month excessive, one thing that would result in an extended squeeze out there.
Bitcoin Funding Charges At present Have A Extremely Constructive Worth
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 pattern exhibits a bullish sentiment is extra dominant out there at the moment.
Then again, the funding price being optimistic suggests there are extra shorts out there in the intervening time as they’re paying a charge to the longs.
Now, here’s a chart that exhibits the pattern 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 | Supply: CryptoQuant
As you’ll be able to see within the above graph, the Bitcoin funding price is optimistic proper now, and has been on the rise in latest 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 have been noticed was again in Might, shortly after which the value of the crypto crashed from practically $40k all the way in which all the way down to $30k.
A “long squeeze” happened out there then. A squeeze is an occasion the place a considerable amount of fast liquidations happen in an overleveraged setting.
In an extended squeeze, a pointy swing downwards within the worth (when funding charges are optimistic) 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 optimistic values at the moment, an extended squeeze is a risk, on condition that the value observes a pointy sufficient lower.
BTC Worth
On the time of writing, Bitcoin’s price floats round $20.7k, up 1% within the final week.
Appears to be like like the worth of the crypto has taken a success over the past 24 hours | Supply: BTCUSD on TradingView
Featured picture from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com