Will the Bitcoin funding rate soon turn into a deep red, short pressure?

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On-chain data shows that bitcoin fund rates have sunk into deep negative values, something that could pave the way for a brief pressure on the market.

Bitcoin has a red value in all exchange funding rates at the moment

As pointed out by an analyst in a CryptoQuant post, BTC may see a slight improvement in the short term due to the current funding rate.

“Funding Rate” is an indicator that measures the periodic fees that Bitcoin futures long and small traders exchange with each other.

When the value of this metric is positive, it means that Longs is offering a premium to shorts at the moment to hold their position.

Since the market has a longer time, such a trend shows that a bullish sentiment is dominant in the futures market at the moment.

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On the other hand, the negative values ​​of the fund rate indicate that there are more shorts in the market at present and the overall sentiment is bearish at the moment.

The chart below shows the trend of all exchange bitcoin fund rates last week.

Bitcoin funding rate

The value of the indicator seems to be less than zero at the moment | Source: CryptoQuant

As you can see in the graph above, the Bitcoin funding rate has dropped in the last few days and has a relatively negative value at the moment.

This means that futures traders are depositing shorts in the market, the chart shows a similar trend just a few days ago.

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Then, the price rises sharply and creates a small pressure, which further expands the price swing.

A “short squeeze” occurs when a sudden sharp change in price causes a massive liquidation of small traders.

Larger liquefaction moves Bitcoin in the opposite direction, resulting in more leverage flushes. Thus, the liquidation cascades together and the phenomenon is called a “squeeze”.

Since shorts are accumulating in the BTC futures market at the moment, it is possible that a swing in the price could create such pressure to bring some upside for crypto.

However, like a few days ago, this type of liquidation is likely to increase in the short term.

BTC price

At the time of writing, the price of Bitcoin is about $ 19.2k, down 9% from last week. The chart below shows the price trend of crypto over the last five days.

Bitcoin price chart

Looks like the price of the coin has sunk down over the last few days | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com

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