Shiba Inu (SHIB) continues to shake up the cryptocurrency market, while funding rates on many exchanges, including Binance, have reached negative levels. Although it sounds like a bad thing, according to analisdollarser, it can only be a reflection of the current feeling in the market. Here’s what you need to know…
What does negative funding rate mean?
Funding rates are payments made by both bears and bulls to offset the price of a perpetual futures contract and bring it closer to the value of the underlying cryptocurrency, or simply the spot price. The funding rate is an essential tool for the proper functioning of perpetual contracts.
Cryptocurrency traders and investors can use funding rates to determine current market sentiment. Generally, positive funding means that most investors are bullish and funding is mostly geared towards short-term investors. Negative funding means that bears are funding long positions to open more positions.
With Shiba Inu (SHIB) reaching a new ATH and facing almost 100% growth in the last three days, most traders consider SHIB to be leveraged and overbought and therefore start closing their long positions .
SHIB price effects
Since the funding rates have reached negative values, we can already see the reflections of such an effect. Currently, SHIB has withdrawn 10% in the last four hours. Additional selling pressure could come from the overall negative sentiment in the market as Bitcoin (BTC) pulls back from the previous ATH and plummets below $60,000.
The retracement zone for SHIB is most likely linked to the psychological $0.00006 resistance that has yet to be surpassed by the meme-based cryptocurrency. The pullback in SHIB has not accelerated yet, indicating that traders are willing to stay in SHIB rather than panic sell.