The cryptocurrency market took a major hit on Friday after the market recorded a significant decline in overall value. Liquidations were sitting above $200 million, and the cryptocurrency market lost over 9% of its value. Ever since, predictions for the near-term price performance of Bitcoin and other leading assets have been largely bearish.
New data from CryptoQuant, a leading on-chain data analytics provider, is backing up the negative sentiments shared by key players in the market. According to the data shared by CryptoQuant, not only is the cryptocurrency market currently being attacked by the bears, market players are being told that they should expect to record more losses than it already has, this is according to funding rates.
The data, as compiled by researcher and on-chain analyst caueconomy explained that the funding rates of perpetual futures typically signal the present market by us. Cryptocurrency traders typically build short positions during these times. The analyst added that the last time a negative value was spotted was back in 2022 when the price of bitcoin was trading at $16,000.
“The market is mostly bearish and is betting on further declines, according to funding rates.
The funding rate of perpetual futures normally signals the current market bias, at which point traders build short positions.The last such negative hourly value was during December 2022, with the price of Bitcoin around 16 thousand US dollars. If we notice, we also see all the periods where the majority of the market bet on a fall during this year. It was usually on local floors.”
He went further to explain that this can be tied to the typical bias that takes place in the cryptocurrency market. He remarks that there is usually a sweet end after traders bet on the directional bias, and the market ends up recording a significant opposing change in price value.
“This happens due to the contrary nature of the common market bias, usually when traders build high leverage in the futures market by betting on a directional bias, any strong contrary change in price ends up generating a squeeze. If we have more leverage building and bearish bets in this setup we could have a price recovery driven by cascading shorts liquidations.” The analyst further added.