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Bitcoin Dips Below $80K as Futures Funding Turns Negative
The cryptocurrency market has been plagued by uncertainty in recent days, with the price of Bitcoin (BTC) plummeting below $80,000. This drastic decline follows a trend of failed attempts to break through previous highs, indicating that investors are becoming increasingly bearish.
A key indicator that suggests this sentiment is the perpetual funding rate, which has recently turned negative. A perpetual funding rate is used in futures contracts and represents the cost of maintaining a long position over time. When this rate becomes negative, it can be taken as a sign that investors expect the price to decline further, leading to increased selling pressure.
Historically, instances where the funding rate has dropped to negative values have been followed by significant price drops for BTC. In previous times, such as during the FTX collapse or the Covid-19 crisis, negative rates correlated with major downturns in the asset’s value.
The perpetual funding rate is used to balance payments between long and short positions in futures contracts. In a bull market, this rate would typically stay positive, indicating widespread optimism among investors. However, recent developments have led to an oscillation of the rate between positive and negative values, reflecting investor indecision.
Source: https://crypto-economy.com/bitcoin-dips-below-80k-as-futures-funding-turns-negative/
