Data reveals the Bitcoin funding fee has elevated to a comparatively excessive optimistic worth lately, one thing that might result in an extended squeeze available in the market.
Bitcoin Funding Rate Becomes Positive As Open Interest Rises Up
As identified by an analyst in a CryptoQuant post, the BTC funding fee has a optimistic worth in the meanwhile.
The “open interest” is an indicator that measures the entire quantity of positions at present open within the Bitcoin futures market.
When the worth of this metric is excessive, it means there may be a considerable amount of leverage concerned available in the market proper now. Excess leverage normally results in the crypto’s value turning extra unstable.
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On the opposite hand, low values of the open curiosity can lead to lesser volatility within the BTC market as there isn’t a lot leverage concerned within the futures market.
Now, here’s a chart that reveals the pattern within the open curiosity over the previous week:
Looks just like the metric's worth has elevated lately | Source: CryptoQuant
As you may see within the above graph, the Bitcoin open curiosity has noticed an increase in latest days. This might imply that the crypto might face larger volatility within the coming days.
Another indicator, the “funding rate,” measures the periodic charge that merchants on derivatives exchanges pay one another to carry onto their positions. This metric tells us how the open curiosity is split between the lengthy and brief merchants in the meanwhile.
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The beneath chart reveals how this indicator’s worth has modified in the course of the previous seven days.
The worth of the indicator appears to have been inexperienced lately | Source: CryptoQuant
From the graph, it’s obvious that the Bitcoin funding fee has a comparatively excessive optimistic worth at present. This signifies that there are a better variety of longs current available in the market proper now.
Since lengthy merchants are paying a premium to maintain their positions (which is why the speed is optimistic), the general market sentiment is leaning in direction of bullish.
However, with the excessive open curiosity values, it’s doable that any massive swing within the value could cause what’s known as a “long squeeze,” which is an occasion the place mass liquidations of lengthy positions cascade collectively and push the value additional down.
At the time of writing, Bitcoin’s value floats round $20.9k, down 2% within the final week. Over the previous month, the crypto has misplaced 5% in worth.
The value of BTC has climbed up over the previous couple of days | Source: BTCUSD on TradingView
Featured picture from Aleksi Räisä on Unsplash.com, charts from TradingView.com, CryptoQuant.com