Bitcoin Funding Rates On BitMEX Have Plunged To Deep Red Values
As pointed out by an analyst in a CryptoQuant , BTC felt a bullish boost the last time this pattern was observed. The “funding rate” is an indicator that measures the number of periodic fees that futures traders on a derivative exchange are currently exchanging between each other.
When the value of this metric is positive, it means the holders of long contracts are currently paying a premium to the short holders in order to keep their positions. Such a trend implies that the majority of the investors on the exchange hold a bullish sentiment right now.In the context of the current discussion, the relevant derivative exchange is BitMEX. Here is a chart that shows the trend in the Bitcoin funding rates for this platform over the last year and a half:
Looks like the value of the metric has been quite red in recent days | Source:As shown in the above graph, the Bitcoin funding rates on the BitMEX exchange have taken a plummet toward deep negative values recently. This means that a large number of short contracts are piling up on the platform in comparison to long contracts. Generally, when the futures market becomes too unbalanced towards any one side, a sharp price move in the opposite direction to what the investors are heavily betting on becomes more probable.
This is because a mass liquidation event, called a “squeeze,” is generally more likely to take place towards the side that has more contracts open. In a squeeze, a swing in the price triggers a large amount of simultaneous liquidations and these liquidations only end up fueling said move further in return. A cascade of liquidations can then occur thanks to this amplified price move.
BTC Price
At the time of writing, Bitcoin is trading around $27,500, down 4% in the last week.BTC seems to have plummeted over the last couple of days | Source: