Bitcoin Funding Rate Plummets on Binance — Is a Short Squeeze Imminent? | Bitcoinist.com
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In the final days of April, Bitcoin’s price exhibited a sluggish trend before springing back to life, welcoming May with renewed vigor. The leading cryptocurrency is now hovering around $98,000, teasing the highly sought-after $100,000 mark as the weekend approaches.
After dropping below the $100,000 price point in early February, BTC has faced challenges in generating any substantial upward momentum over the past three months. Recent on-chain data indicates that the possibility of reclaiming a six-figure valuation may be forthcoming, with Bitcoin poised to renew its bullish trajectory.
What Do Negative Funding Rates Imply for BTC Price?
In a recent Quicktake update on the CryptoQuant platform, on-chain analyst Amr Taha disclosed that Bitcoin funding rates on Binance have seen a notable decrease recently. The “funding rate” serves as a metric that gauges the periodic fee exchanged between traders in the derivatives (perpetual futures) market.
A high or positive funding rate indicates that long traders (those holding buy positions) are incurring fees paid to short traders (those holding sell positions). This pattern usually reflects a prevailing bullish sentiment within that market.
Conversely, a negative funding rate implies that investors with short positions are compensating traders holding buy positions in the derivatives market, suggesting that bearish forces dominate.
Source: CryptoQuant
According to data from CryptoQuant, Bitcoin’s funding rate on Binance, the largest crypto exchange by trading volume, has fallen into deeply negative territory at approximately -0.0008%. This shift reflects a considerable change in market sentiment and dynamics.
In his Quicktake post, Taha linked the recent downturn in funding rates to aggressive selling by Bitcoin retail traders. The analyst correlated the selling pressure with market participants’ fears rather than indicating “fundamental weakness.”
Taha pointed out that when funding rates dip significantly into negative territory, the Bitcoin market often becomes vulnerable to a short squeeze, forcing short traders to cover their positions as prices rise—thereby propelling further upward movement. Additionally, historically, very low funding rates tend to coincide with local price bottoms, signaling impending bullish reversals.
Bitcoin Price Overview
At the time of writing, BTC’s price is approximately $96,950, marking a 2% increase in the last 24 hours. If BTC’s recent bullish momentum and the latest on-chain insights hold true, there’s a promising opportunity for the premier cryptocurrency to surpass the $100,000 threshold this weekend.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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