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On-chain information exhibits the Bitcoin funding charges have now hit a 6-month excessive, one thing that would result in a protracted squeeze available in the market.

Bitcoin Funding Rates Currently Have A Highly Positive Value

As identified by an analyst in a CryptoQuant post, BTC funding charges have surged as much as the best for the final six months.

The “funding rate” is an indicator that measures the periodic payment that merchants within the Bitcoin futures market must pay one another.

When the worth of this metric is bigger than zero, it means lengthy merchants are paying shorts to carry onto their positions proper now. Such a pattern exhibits a bullish sentiment is extra dominant available in the market at present.

On the opposite hand, the funding price being constructive suggests there are extra shorts available in the market in the intervening time as they’re paying a payment to the longs.

Now, here’s a chart that exhibits the pattern within the Bitcoin funding charges over the 12 months 2022 to date:

The worth of the metric appears to have spiked up over the previous day | Source: CryptoQuant

As you possibly can see within the above graph, the Bitcoin funding price is constructive proper now, and has been on the rise in current days.

During the previous day, the indicator has hit its highest worth for the final six months, suggesting there are a considerable amount of longs open within the futures market proper now.

The final time such excessive values of the metric have been noticed was again in May, shortly after which the worth of the crypto crashed from practically $40k all the best way all the way down to $30k.

A “long squeeze” came about available in the market then. A squeeze is an occasion the place a considerable amount of speedy liquidations happen in an overleveraged atmosphere.

In a protracted squeeze, a pointy swing downwards within the worth (when funding charges are constructive) liquidates a lot of lengthy contracts, which solely amplifies this downswing additional.

This amplified plunge then liquidates much more contracts, and so forth. In this fashion, liquidations can cascade collectively and make the worth take a pointy plummet.

As the Bitcoin funding charges are at excessive constructive values at present, a protracted squeeze is a risk, provided that the worth observes a pointy sufficient lower.

BTC Price

At the time of writing, Bitcoin’s price floats round $20.7k, up 1% within the final week.

Looks like the worth of the crypto has taken successful over the last 24 hours | Source: BTCUSD on TradingView

Featured picture from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com