Bitcoin Funding Rate Falls To Critical Level — Short Squeeze Incoming?

3 hours ago

After a dour show passim the week, the terms of Bitcoin experienced a just magnitude of bullish impetus connected Friday, February 13th. Going into the weekend, the premier cryptocurrency seemed connected its mode to reclaim the psychologically applicable $70,000 level. Interestingly, caller on-chain information shows that this latest bullish spurt mightiness beryllium the commencement of, astatine least, a short-term rally for the Bitcoin price.

Is Bitcoin On The Verge Of A Short Squeeze?

In a Quicktake station connected the CryptoQuant platform, marketplace expert CryptoOnchain revealed that the Bitcoin Funding Rate connected Binance, the world’s largest cryptocurrency speech by trading volume, has dropped to a critically debased level — 1 not seen successful implicit a year. The applicable indicator present is the 14-day Simple Moving Average (SMA-14) of BTC Funding Rate.

Typically, the Funding Rate metric estimates the periodic interest paid by traders successful a derivatives marketplace for a peculiar cryptocurrency (Bitcoin, successful this case). When the backing complaint is successful the affirmative territory, it usually implies that the agelong traders (investors with bargain positions) are paying a interest to abbreviated traders (investors with merchantability positions) successful the derivatives market.

On the flip side, a antagonistic backing complaint metric, arsenic is the lawsuit currently, suggests that the outgo is going from the abbreviated traders to the agelong traders. Data from CryptoQuant shows that the 14-day SMA of the Bitcoin Funding Rate connected Binance has fallen to -0.002, its lowest level since September 2024.

As CryptoOnchain rightly noted, a deeply antagonistic backing rate, particularly 1 that lasts implicit a 14-day average, indicates that bears (short traders) are progressively betting against the premier cryptocurrency. The marketplace expert noted that these highly antagonistic values often correlate with the bottommost of terrible downward trends.

CryptoOnchain wrote successful the post:

From an on-chain and marketplace science perspective, profoundly antagonistic backing rates often service arsenic a beardown Contrarian Signal. The marketplace presently appears to beryllium heavy “overcrowded” connected the abbreviated side.

From a humanities perspective, this on-chain inclination has often acceptable the signifier for a potent abbreviated squeeze, wherever a insignificant terms rebound could trigger a cascade of liquidations of the mounting abbreviated positions. This cascade of abbreviated liquidations often serves arsenic pitchy fuel, further propelling the Bitcoin terms to the upside.