Bitcoin (BTC) and Ethereum (ETH) Shareholders Hit Hard by the Recent Market Downturn

Both BTC and ETH have seen their funding rates drop significantly over the past few days. Negative funding rates for cryptocurrencies could lead some investors to

Bitcoin (BTC) and Ethereum (ETH) shareholders have been hit hard by the recent downturn in the market. However, shareholders are not the only ones being affected. Both BTC and ETH have also seen their funding rates drop significantly over the past few days. Negative funding rates for cryptocurrencies could lead some investors to believe that a price drop is imminent, encouraging them to sell their holdings or take short positions themselves. This selling pressure could contribute to an actual decline in the price of BTC and ETH.

With negative funding rates, holding long-term futures contracts also becomes less attractive. The fees eat into any potential profits, prompting some traders to unwind their long positions or be more hesitant to open new ones. This reduces overall buying pressure, which could weaken the price support for BTC and ETH.

The shift in sentiment could lead to higher volatility in the near term. As long and short positions compete, price volatility for BTC and ETH could become more pronounced.

Conversely, some investors may view a significant and sustained decline in funding rates as a counter-trend indicator. They may view this as a sign of excessive bearishness, representing a potential buying opportunity for BTC and ETH at what they consider a discounted price.

At the time of writing, traders were showing a slight bullish preference for Bitcoin as long positions finally outpaced short positions, accounting for 50.7% of all trades. Ethereum saw a similar surge in bullish sentiment as the percentage of long positions on Ethereum increased by 50.9%.

Implied volatility for both BTC and ETH also rose during this period. Higher implied volatility indicates that options traders are pricing in a higher probability of large price movements for BTC and ETH in the future. This suggests increased uncertainty about the future direction of the markets. If market sentiment turns strongly bearish, negative financing could amplify any price decline due to increased short selling. Conversely, a sudden positive shift may lead to a larger price increase due to higher volatility.

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