 ▲ Bitcoin (BTC) © Coinreaders |
In the Bitcoin (BTC) derivatives market, funding rates skyrocketed more than 140% in a single day, signaling that leveraged investors betting on a bull market have reached peak greed. However, a strong warning has emerged that this could become a ticking time bomb capable of triggering massive cascading liquidations.
According to crypto-focused media outlet Finbold, on the morning of February 16 (local time), an unusual surge of over 140% in daily funding rates was detected in the Bitcoin derivatives market. This indicates that perpetual futures prices have formed a noticeable premium over the spot market, prompting leveraged investors, confident in a price rebound, to aggressively expand long positions even while paying substantial fees.
Interestingly, despite the explosive rise in funding rates, Bitcoin’s open interest fell by 0.08%, effectively remaining flat. This suggests that rather than a significant influx of new capital, existing market participants are reallocating their current funds to readjust bullish positions and reinforce unwavering conviction.
A spike in funding rates without a corresponding rise in open interest can act as short-term upward price momentum if supported by buying pressure in the spot market. On the other hand, if Bitcoin fails to rebound, heavily leveraged positions face an elevated risk of rapid forced liquidation, triggering a long squeeze. Such liquidations could unleash cascading sell pressure within a short period, exponentially increasing downside volatility.
In contrast to the extreme optimism in the derivatives market, Bitcoin’s actual price has slipped about 0.3%, hovering around $68,705. The divergence between soaring funding rates and weakening spot prices clearly shows that investors are prematurely anticipating a rebound not yet reflected on the charts.
Experts warn that bullish sentiment concentrated solely in the derivatives market is as fragile as a sandcastle. Unless active buyers in the spot market step in to drive a clear trend reversal, the current inflated leverage could become a sharp double-edged sword capable of collapsing the market in an instant.
Disclaimer: This article is for investment reference only, and no responsibility is assumed for any investment losses incurred based on it. The content should be interpreted for informational purposes only.