Analysis Company Examined Funding Rates in Bitcoin! Here’s How It Should Be Interpreted And The Movement In The Last Fall!

Crypto even analysis firm Alphractal has recently revealed the relationship between the Funding Rate of perpetual futures contracts and Bitcoin price movement. Bitcoin gave information about market dynamics.

The Funding Rate, which reflects the balance between buyers and sellers, tends to rise when optimism dominates the market. A high Funding Rate usually indicates an increase in long positions as traders expect further price increases.

However, Alphractal’s analysis points to an interesting departure in current market behavior. While the Funding Rate remains high, the price of Bitcoin has begun to decline. The company outlines three possible explanations for this phenomenon:

• Extreme Optimism: A wave of long positions entered the market during Bitcoin’s recent price increase, inflating the Funding Rate. However, the lack of continued buying pressure triggered a price correction.
• Sales Pressure: Long holders making profits or strategically entering into short positions at high Funding Rate levels may have caused prices to retreat.
• Short Term Support: Despite the decline, a positive Funding Rate indicates market confidence. A stabilization or further decline in the Funding Rate could provide clues about a potential shift in sentiment.

Alphractal warns that the combination of a persistently high Funding Rate and falling prices could increase the risk of liquidation in the market. Watching the Funding Rate’s trajectory can be crucial to predicting Bitcoin’s next moves.

*This is not investment advice.