Bitcoin’s price action hasn’t seen much stability over the past few weeks. The constant fluctuation in prices has frustrated the market to such an extent that a portion of investors actually want the price to drop further.
Shorts on the house!
The on-chain data indicated that there has been a huge increase in the number of investors seeking to short the centerpiece over the past two days. This says a lot about the large short-term interest demand for Bitcoin.
This short selling interest has increased by 329.66% in the last week alone. And, the consequences of the same have been seen on the performance of the king’s play.
Due to the recent short selling, the average funding rate has turned negative. The indicator in the chart below is revisiting the negative zone, which is a good sign. Notably, around the first week of March, funding rates were worse.
It is also worth noting that until the first week of March, crypto-marginated futures were trending lower.
Unlike stable margin futures, crypto margin contracts are vulnerable to falling prices. In such a situation, not only do they lose their profits, but they also lose the value of the asset.
Stablecoin margin contracts, on the other hand, are immune to loss of value. These are only preferred by long traders. Selling them short results in immediate liquidation as they cannot be hedged.
As a result, crypto-marginated contracts are down 27% in 10 months. However, their recent rise could be indicative of investors regaining confidence in Bitcoin.
Otherwise, there is no reason for investors to dare to make such a move in the middle of a bear market. (Rise in the charts)
Second, the negative funding rate mentioned above supports this confidence. Falling funding rate is actually a good sign for investors as it indicates buy signals.
Multiple lows in funding rates have been followed by price rises in the past, although these declines have been much larger. Either way, if the historical tests of the indicator go as expected, the price can be expected to rise in the coming days. (ref. Bitcoin Funding Rate Image)