In the past 4.47% drop over $BSP 24 hours, the current price is 33.32. In the same period, the funding rate recorded -0.0001241, meaning shorts are paying longs. These are the two clearest signals on the current order book.
Price falling appearing at the same time as a negative funding rate points to the concentrated buildup of bearish sentiment. In plain terms, bearish participants in the market are adding to their short positions, and their cost basis is accumulating. In this kind of structure, if the price unexpectedly stops falling or even rebounds slightly, shorts will be in a very passive position: they are losing money as the price moves against them, and they’re also paying to maintain their positions. Even a small squeeze setup can be triggered easily. Open interest is currently around 17303. If that number does not decrease significantly during the price decline—and instead remains stubborn or even confirms the shorts are not admitting defeat and exiting—that would further amplify the potential for a reversal volatility.
The strongest counter-evidence to the current situation is this: my inference is that shorts are crowded, but it’s possible that the long-side share in the open interest isn’t low. They may also be making losses and stopping out, causing the funding rate to passively turn negative. If over the next few days the price continues to move lower while the funding rate quickly climbs back to positive, or near zero, that would mean shorts have achieved an overwhelming victory and started taking profits, and the current negative funding is merely a blip within the selloff—not a signal of trend reversal.
In this structure, the ones most easily forced into a squeeze are retail traders who chased shorts during the decline. Their costs are not much lower than those of the existing shorts, but they take on extra funding fees. If the market gets any buy-side push that drives a rebound, they are the first to be squeezed out.
My view is that the current combination of price and funding rate provides an asymmetric risk-reward for a short-term bounce. However, this is a structural conclusion derived from a single signal (the funding rate). I cannot see the exact long/short distribution of open interest, so it’s not something I’m highly certain about.
Trading tag: #TradFi #链上美股 #BSP
Where do you think this assessment is most likely to be wrong?
Price falling appearing at the same time as a negative funding rate points to the concentrated buildup of bearish sentiment. In plain terms, bearish participants in the market are adding to their short positions, and their cost basis is accumulating. In this kind of structure, if the price unexpectedly stops falling or even rebounds slightly, shorts will be in a very passive position: they are losing money as the price moves against them, and they’re also paying to maintain their positions. Even a small squeeze setup can be triggered easily. Open interest is currently around 17303. If that number does not decrease significantly during the price decline—and instead remains stubborn or even confirms the shorts are not admitting defeat and exiting—that would further amplify the potential for a reversal volatility.
The strongest counter-evidence to the current situation is this: my inference is that shorts are crowded, but it’s possible that the long-side share in the open interest isn’t low. They may also be making losses and stopping out, causing the funding rate to passively turn negative. If over the next few days the price continues to move lower while the funding rate quickly climbs back to positive, or near zero, that would mean shorts have achieved an overwhelming victory and started taking profits, and the current negative funding is merely a blip within the selloff—not a signal of trend reversal.
In this structure, the ones most easily forced into a squeeze are retail traders who chased shorts during the decline. Their costs are not much lower than those of the existing shorts, but they take on extra funding fees. If the market gets any buy-side push that drives a rebound, they are the first to be squeezed out.
My view is that the current combination of price and funding rate provides an asymmetric risk-reward for a short-term bounce. However, this is a structural conclusion derived from a single signal (the funding rate). I cannot see the exact long/short distribution of open interest, so it’s not something I’m highly certain about.
Trading tag: #TradFi #链上美股 #BSP
Where do you think this assessment is most likely to be wrong?