Bitcoin Funding Rates At 6-Month High, Long Squeeze Alert?

On-chain knowledge exhibits the Bitcoin funding charges have now hit a 6-month excessive, one thing that might result in a protracted squeeze out there.

Bitcoin Funding Charges At present Have A Extremely Optimistic Worth

As identified by an analyst in a CryptoQuant post, 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 payment that merchants within the Bitcoin futures market must pay one another.

When the worth of this metric is larger 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 at present.

Then again, the funding price being optimistic suggests there are extra shorts out there in the intervening time as they’re paying a payment to the longs.

Now, here’s a chart that exhibits the development within the Bitcoin funding charges over the yr 2022 to this point:

The worth of the metric appears to have spiked up over the previous day | Supply: CryptoQuant

As you may see within the above graph, the Bitcoin funding price is optimistic proper now, and has been on the rise in current days.

Throughout 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 best way right down to $30k.

A “lengthy squeeze” happened out there then. A squeeze is an occasion the place a considerable amount of fast liquidations happen in an overleveraged setting.

In a protracted squeeze, a pointy swing downwards within the worth (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. On this manner, liquidations can cascade collectively and make the value take a pointy plummet.

Because the Bitcoin funding charges are at excessive optimistic values at present, a protracted squeeze is a chance, on condition that the value observes a pointy sufficient lower.

BTC Worth

On the time of writing, Bitcoin’s worth floats round $20.7k, up 1% within the final week.

Appears to be like like the worth of the crypto has taken successful over the last 24 hours | Supply: BTCUSD on TradingView

Featured picture from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com