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 Rates Currently Have A Highly Positive Value
As identified by an analyst in a CryptoQuant submit, 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 charge that merchants within the Bitcoin futures market must 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 presently.
On the opposite hand, the funding price being optimistic 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 exhibits the development within the Bitcoin funding charges over the 12 months 2022 to date:
The worth of the metric appears to have spiked up over the previous day | Source: CryptoQuant
As you possibly can see within the above graph, the Bitcoin funding price is optimistic 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 had 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 “lengthy squeeze” befell 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 value (when funding charges are optimistic) 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 optimistic values presently, an extended squeeze is a risk, on condition that the value observes a pointy sufficient lower.
At the time of writing, Bitcoin’s value floats round $20.7k, up 1% within the final week.
Looks like the worth of the crypto has taken a success over the past 24 hours | Source: BTCUSD on TradingView
Featured picture from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com