Dogecoin Sees 10% Rise, Longs Piling Up on Futures Market
Dogecoin Funding Rate Attains Highly Positive Values After Rally
Dogecoin has experienced a surge of about 10% over the past day with traders betting on the price rise to continue as long positions are being opened on the futures market, as per on-chain analytics firm Santiment. The metric of interest here is the “Binance funding rate,” which monitors the periodic fee that Dogecoin futures contract holders on Binance are exchanging with each other. When the funding rate is positive, it indicates that long investors are paying a premium to the short ones to hold onto their positions, signaling a bullish sentiment. Conversely, negative values imply a dominant bearish mentality in the sector. As shown in the chart, the Dogecoin funding rate on Binance has recently turned highly positive as the latest rise in the meme coin’s price has taken place, suggesting that speculators are betting on the price rise to continue.
As reflected from the chart, spikes in the Binance funding rate have coincided with local tops in the cryptocurrency during the last few weeks. This pattern may exist because as the futures market accumulates long positions, the chances of a long squeeze taking place become significant. A “squeeze” refers to an event where a sudden swing in the price unleashes a cascade of liquidations on the sector. When longs outnumber shorts, such a waterfall of liquidations is naturally easier on their side as compared to the shorts. Therefore, while Dogecoin is riding on sharp momentum, any pullback might result in a long squeeze, which could lead to a notable drawdown.
Following the latest rally, Dogecoin has surged towards the $0.087 level for the first time since April.
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net
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