Ethereum (ETH) Funding Rate Hits 14-Month Low As Price Hits $1,430: Sign Of Short Squeeze Or Something Else?

The funding rate for Ethereum ETH/USD hit a 14-month low on Sunday as the asset’s price dropped to a four-week low of $1,430.

What Happened: ETH funding rates signalled that traders were largely bearish on its price, noted Crypto Quant analyst “Maartunn” in a post.

ETH: Funding Rates hits a 14-month low 

This morning I was just doing my regular analysis about the cryptomarkt. I checked serveral charts to setup my bais for next week. One thing which catched my eye is $ETH Funding Rates.

Let's find out why #Ethereum #Bitcoin #Crypto pic.twitter.com/MmPThNqn9k

— Maartunn (@JA_Maartun) August 28, 2022

See Also: ETHEREUM (ETH) PRICE PREDICTION

Funding rates turn negative when short traders pay a premium to long traders to keep their position open, meaning that the majority of traders are betting on a lower ETH price in the short term.

The metric turning negative is not in itself a particularly big signal, the analyst said, but noted that it “gets more interesting” when considering the last time the funding rate hit such a low level.

“The last time Funding Rates were this negative, it was in July '21 just before a huge short-squeeze on Bitcoin & Ethereum."

However, interpreting this as a sure sign of a short squeeze may not be the best course of action considering a large number of market participants are likely betting on ETH’s short-term price action in anticipation of its upcoming network upgrade. 

See Also: Ethereum Merge Date Gets Moved Up By 4 Days: Why The Change Is Significant

“Negative funding can be a result of traders hedging their spot exposure to be delta neutral. This makes sense because of the upcoming ETH2.0 Merge,” stated the analyst on Twitter.

Price Action: At press time, ETH was trading at $1,436, down 3.88% over the last 24 hours, as per data from Benzinga Pro. Bitcoin BTC/USD was trading at $19,660, down 1.9% over the same period.