As Ethereum bleeds from its October high of $4,800 down to $1,900, the derivatives market is flashing a rare contrarian signal. The 14-day Simple Moving Average (SMA) of Ethereum funding rates on Binance has plunged deep into negative territory, hitting -0.006.
Key Insights:
3-Year Low Sentiment:
This level of -0.006 marks the lowest value recorded since early December 2022. It indicates that bearish sentiment has reached an extreme peak not seen in the last three years.
Overcrowded Shorts:
Such a deeply negative rate implies that short sellers are aggressively dominating the market, paying a significant premium to keep their positions open at these lower price levels.
Reversal Setup:
Historically, extreme negative funding rates at major price support levels often precede a massive short squeeze. When the crowd is this convinced that prices will fall further, the market tends to move in the opposite direction to liquidate late bears.
Current data suggests we may be witnessing a classic capitulation event, mirroring the bottom formation of late 2022, potentially setting the stage for a sharp recovery.
Written by CryptoOnchain
