Bitcoin Funding Rate Falls To Critical Level — Short Squeeze Incoming?
After a dour efficiency all through the week, the worth of Bitcoin skilled a good quantity of bullish impetus on Friday, February thirteenth. Going into the weekend, the premier cryptocurrency appeared on its method to reclaim the psychologically related $70,000 degree. Interestingly, current on-chain information reveals that this newest bullish spurt is likely to be the beginning of, no less than, a short-term rally for the Bitcoin value.
Is Bitcoin On The Verge Of A Short Squeeze?
In a Quicktake put up on the CryptoQuant platform, market analyst CryptoOnchain revealed that the Bitcoin Funding Rate on Binance, the world’s largest cryptocurrency change by buying and selling quantity, has dropped to a critically low degree — one not seen in over a yr. The related indicator right here is the 14-day Simple Moving Average (SMA-14) of BTC Funding Rate.
Typically, the Funding Rate metric estimates the periodic payment paid by merchants in a derivatives marketplace for a specific cryptocurrency (Bitcoin, on this case). When the funding price is within the constructive territory, it normally implies that the lengthy merchants (traders with purchase positions) are paying a payment to brief merchants (traders with promote positions) within the derivatives market.
On the flip facet, a unfavorable funding price metric, as is the case presently, means that the fee goes from the brief merchants to the lengthy merchants. Data from CryptoQuant reveals that the 14-day SMA of the Bitcoin Funding Rate on Binance has fallen to -0.002, its lowest degree since September 2024.
As CryptoOnchain rightly famous, a deeply negative funding rate, particularly one which lasts over a 14-day common, signifies that bears (brief merchants) are more and more betting in opposition to the premier cryptocurrency. The market analyst famous that these extraordinarily unfavorable values typically correlate with the underside of extreme downward developments.
CryptoOnchain wrote within the put up:
From an on-chain and market psychology perspective, deeply unfavorable funding charges typically function a powerful Contrarian Signal. The market presently seems to be closely “overcrowded” on the brief facet.
From a historic perspective, this on-chain development has typically set the stage for a potent brief squeeze, the place a minor value rebound might set off a cascade of liquidations of the mounting brief positions. This cascade of brief liquidations typically serves as jet gas, additional propelling the Bitcoin value to the upside.
Bitcoin Price At A Glance
As of this writing, the worth of Bitcoin stands at round $69,000, reflecting an over 5% bounce prior to now 24 hours.
