As an analyst noted in a CryptoQuant post, the current funding rate suggests that the price is in a new decline at the moment. The “Funding Rate” is an indicator that measures the periodic fee that traders have to pay each other in the Bitcoin futures market.
If the value of this metric is above zero, it means that the long traders are currently paying a premium to the short traders to hold their positions. Such values indicate that bullish sentiment prevails in the market at the moment.
On the other hand, negative values of the indicator mean that the mood is mostly bearish at the moment, since short positions are paid by long positions.
The price of the cryptocurrency has fallen in recent months whenever the Bitcoin funding rate has reached a relatively high positive value. Likewise, negative swings have caused the value of BTC to record an uptrend.
High positive values mean that longs are piling up on the market. A sudden drop, significant enough, can dissolve many of these positions, which can push the price down even further. Such an event, in which there is a cascade of liquidations, is called a “squeeze” (or in this case a “long squeeze”).
A few days ago, when the price of the crypto currency was above $ 23,000, the funding rate again reached a positive peak, and the price subsequently declined. However, the current value of the indicator still seems to be quite positive, which could mean that the decline has not yet been completed.