Ethereum Funding Rates Drop To 14-Month Low, Short Squeeze In The Making?

Keshav Verma

2 years ago

3 mins read

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On-chain data shows the Ethereum funding rates have now declined to the lowest value in 14 months, something that could pave way for a short squeeze in the market.

Ethereum Funding Rates Reach Highly Negative Value

As pointed out by an analyst in a CryptoQuant post, the ETH funding rates are currently at their least value since July 2021.

The “funding rate” is an indicator that measures the periodic fee that traders in the Ethereum futures market are exchanging between each other right now.

When the value of the metric is negative, it means short traders are paying a premium to the long traders in order to hold onto their positions. This trend generally hints that a bearish sentiment is more dominant in the market currently.

On the other hand, positive values of the indicator imply longs are overwhelming the shorts at the moment. Naturally, such a trend suggests the majority sentiment is bullish.

Now, here is a chart that shows the trend in the Ethereum funding rates over the past fifteen months or so:

Looks like the value of the metric has been a deep red in recent days | Source: CryptoQuant

As you can see in the above graph, the Ethereum funding rates have declined recently, and have now hit highly negative values.

The indicator’s current values are the lowest they have been since the July of last year, around fourteen months ago.

Back then, these values lead to a big short squeeze taking place in the market that pumped the price of the crypto up.

In a short squeeze, a swing up in the value of Ethereum while the market is overleveraged liquidates a large amount of shorts. These liquidations push the price up even higher, leading to more shorts being flushed down. In this way, liquidations cascade together during a squeeze.

Generally, highly positive funding rates can lead to long squeezes (since there are more longs in the market), while negative ones may result in shorts getting squeezed.

If the same trend as 14 months ago repeats this time as well, then it’s possible Ethereum could reverse using a short squeeze this time as well.

ETH Price

At the time of writing, Ethereum’s price floats around $1.4k, down 7% in the last seven days. Over the past month, the crypto has lost 10% in value.

The below chart shows the trend in the price of the coin over the last five days.

The value of the crypto seems to have plummeted down over the last couple of days| Source: ETHUSD on TradingView

Featured image from DrawKit Illustrations on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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