Bitcoin’s price has experienced a significant decline, struggling to maintain its upward momentum. A key factor behind this recent drop could be the selling activity in perpetual markets and a long-squeeze event.

The accompanying chart highlights the funding rates, a crucial metric for assessing sentiment in the futures market. This metric shows whether buyers or sellers are executing more aggressively (taker orders) overall. Positive funding rates indicate bullish sentiment, while negative rates suggest bearish sentiment.

Recently, the funding rates have dropped sharply, indicating that the decline was driven by aggressive short selling and the liquidation of many long positions. The funding rates have now turned negative, reflecting an overall bearish sentiment and the dominance of short sellers. However, this could also be seen as a positive sign, as it suggests the futures market is no longer overheated. This scenario could create conditions for a more sustainable bullish trend in the coming months, provided there are no drastic changes.

Written by ShayanBTC