There has been a substantial drop in crypto funding rates for Bitcoin and Ethereum in recent days. How will BTC and ETH react?
holders have been severely impacted by the recent market drawdown. However, it wasn’t just holders who had been affected.The funding rates for both BTC and ETH fell materially over the last few days. Negative crypto funding rates might lead some investors to believe a price decline is imminent, encouraging them to sell their holdings or take short positions themselves.With negative funding rates, holding long futures contracts becomes less attractive.
Conversely, a significant and sustained drop in funding rates could be seen as a contrarian indicator by some investors. They might view it as a sign of excessive bearishness, presenting a potential buying opportunity for BTC and ETH at what they perceive as a discounted price.At the time of writing, traders were slightly bullish around Bitcoin as longs had finally surpassed short positions accounting for 50.7% of all trades.The Implied Volatility for both BTC and ETH also grew during this period.
This suggests growing uncertainty about the future direction of the markets. If the market sentiment sways heavily towards bearish, the negative funding could amplify any price drop due to increased short selling. In contrast to that, a sudden positive shift could lead to a more significant price rise due to higher volatility.Himalay is a full-time journalist at AMBCrypto. A Computer Science graduate, Himalay writes about crypto with a special focus on the latest coin-based updates. He is a fan of gonzo journalism, transgressive fiction, heavy metal, and Manchester United.Subscribe to get it daily in your inbox.
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