Bitcoin markets are currently witnessing a rare phenomenon as funding rates remain negative for several consecutive days. In the perpetual futures market, negative funding indicates that short sellers are paying a premium to maintain their positions, reflecting a pervasive bearish sentiment. However, market analysts warn that this trend may signal an ‘overcrowded’ short trade. When too many participants bet against the asset, the market becomes vulnerable to a short squeeze. If Bitcoin’s price experiences even a minor upward movement, these short sellers may be forced to buy back their positions to limit losses, potentially triggering a sharp price reversal. Historical data suggests that extended periods of negative funding often precede local bottoms, hinting that a bullish shift could be on the horizon.
Source: Multi-day negative Bitcoin funding signals ‘overcrowded’ short trade: Reversal coming?
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