Funding Rates Tank! How Bitcoin and Ethereum Holders Are Reacting to the Market Drawdown

London, England – Cryptocurrency investors are facing significant challenges as funding rates for Bitcoin and Ethereum experience a notable decline. The implied volatility for these digital currencies has also seen a substantial increase in recent days.

Both Bitcoin (BTC) and Ethereum (ETH) holders are feeling the impacts of the recent market downturn, with negative funding rates potentially signaling an impending price drop. This may prompt investors to sell their holdings or take short positions, further driving down the prices of BTC and ETH.

The decrease in funding rates makes long futures contracts less appealing as fees eat into potential profits, leading some traders to close out their long positions or adopt a more cautious approach to new ones. This reduction in buying pressure can weaken the price support for both BTC and ETH, potentially increasing short-term volatility.

On the flip side, a significant and sustained decrease in funding rates could signal an opportunity for some investors. They may interpret this as a sign of excessive pessimism, presenting a chance to buy BTC and ETH at a discounted price.

Traders are currently showing slight bullish sentiment towards Bitcoin, with long positions surpassing short positions accounting for 50.7% of all trades. Similarly, Ethereum is experiencing a rise in bullish sentiment, with long positions on ETH growing to 50.9%.

The implied volatility for both BTC and ETH has also risen, indicating that option traders are pricing in a higher probability of significant price movements in the future. This growing uncertainty about market direction could amplify any price drops due to increased short selling or lead to more significant price rises with increased volatility.