Bitcoin funding rate crashed to a record low not seen since September 2020. The sudden drop in the funding rate indicates fear in the market. The market has been largely bullish since the beginning of the new year but market corrections are imminent. With Bitcoin operating at a whopping level of above $50,000, the market retracement is expected to be as harsh.
The Bitcoin futures contracts’ funding rate has fallen to a low of -0.03%. The crash of the funding rate comes as the cryptocurrency violently fell by a high of $64,000 to around $50,000. The bullish market sentiment transformed into bearish in a spur of a moment.
Bitcoin surged upwards to a new all-time high during the Coinbase listing in anticipation of what the NASDAQ listing would mean for the cryptocurrency sphere. At the same time, the funding rate also remained stable. But as the king of the market fell downwards – which some people account to the power outage in China – the funding rate followed.
The funding rate uses the simple demand and supply mechanism of the market to reach equilibrium. If there are more long positions in the market then short ones, the funding rate will go up and vice versa. The crash of the funding rate represents more short positions as sellers dominate the market.