As shorting demand decreases, this is what Bitcoin has in store for investors
The price action of Bitcoin hasn’t witnessed much stability in the last few weeks. The constant fluctuation in price has frustrated the market to an extent where a section of investors is actually wishing that the price falls further down.
Shorts on the house!
On-chain data has indicated that there has been quite an increase in investors looking to short the king coin in the last couple of days. That goes to say about the significant demand for short interest in Bitcoin.
This shorting interest has risen by 329.66% in the last week alone. And, the consequences of the same have been visible on the king coin’s performance.
Due to the recent shorting, 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’s also interesting to note that up until the first week of March, the crypto-margined Futures contracts were observing a downtrend.
Unlike stablecoin margined Futures contracts, crypto-margined contracts are vulnerable to a price fall. In such a situation, not only do they lose their profits, but they also lose the value of the asset.
Stablecoin margined contracts, on the other hand, are immune to losing value. These are only preferred by long traders. Shorting them leads to immediate liquidation since they can’t be hedged.
As a result, crypto-margined contracts came down by 27% in 10 months. However, their recent increase might be indicative of the fact that investors are gaining confidence in Bitcoin once again.
Otherwise, there is no reason investors would dare to pull off such a stunt in the midst of a bear market. (Uptick on the charts)
Secondly, backing this confidence is the aforementioned negative funding rate. The dip in funding rate is actually a good sign for investors since they indicate buying signals.
Multiple funding rate bottoms have been followed by a price rise in the past, although those dips have been much more significant. Regardless, if the indicator’s historical tests play out as per expectations, one can expect the price to rise in the coming few days. (ref. Bitcoin funding rate image)