Warning Short Squeeze Potential in 2 Cryptocurrencies Despite Negative Funding Rates
Following a significant downturn in the cryptocurrency market last week, a bearish sentiment now pervades most cryptocurrencies, leading to speculative imbalances and liquidity concerns. Particularly noteworthy are two cryptocurrencies currently heavily influenced by short-sellers, setting the stage for potential dynamics favoring a short squeeze.
For this analysis, Finbold accessed data from CoinGlass on July 7, focusing on the funding rates of the most traded cryptocurrencies in the derivatives market, sorted by highest open interest (OI).
A negative funding rate occurs when short positions outweigh longs, prompting the crypto exchange algorithm to charge short-sellers an APR, incentivizing market balance.
Monero surpasses Bitcoin in payment volume for the first time on platform
59 mins ago
‘Ominous signal’ flashes as key recession indicator beats Great Depression levels
1 hour ago
Analyst sets two Bitcoin scenarios to watch out for next week
3 hours ago
Veteran trader sees Bitcoin ‘footshot’ as the next big buying opportunity
4 hours ago
Conversely, positive funding rates impact liquidation prices, potentially favoring either long or short squeezes.
Toncoin (TON) Negative Funding Rates
Toncoin (TON) recorded a -26.65% funding rate on July 7, indicating dominance by short positions. The native token of the Open Network faced criticism related to the Telegram crypto wallet, contributing to bearish pressure.
Despite a significant surge earlier in 2024, the recent market correction led to overdue price adjustments, triggering sell-offs and further declines. Leveraging Telegram’s popularity, the network positions itself as a major competitor to Solana (SOL), attracting investor interest.
Funding Rate Heatmap: TON. Source: CoinGlass
Despite the negative funding rate, TON’s derivatives volume plummeted by 43% in the last 24 hours. Thus, the current $295.34 million open interest may not suffice to trigger a short squeeze, as declining volume suggests short-sellers are closing positions due to the 26.65% annual cost.
TON open interest data. Source: CoinGlass
Notcoin (NOT) Short Squeeze Alert
Conversely, Notcoin (NOT) has risen to the eleventh position in terms of open interest, with a 526% surge in volume. The token, with a $1.64 billion market capitalization, has $219.59 million in open interest, equating to a 0.1338 OI/MCap ratio.
NOT open interest data. Source: CoinGlass
Of particular note is its 57.53% negative funding rate, significantly increasing the likelihood of a short squeeze. NOT operates as a play-to-earn token integrated into the TON Blockchain and Telegram wallet.
Funding Rate Heatmap: NOT. Source: CoinGlass
However, the increased open interest and surge in volume for opening short positions typically signal bearish sentiment. This market trend suggests investors anticipate lower prices for TON and especially NOT.
Should this sentiment persist due to fundamental factors and negative news, a short squeeze may fail to materialize as prices continue to decline. These highly shorted coins would require bullish catalysts to trigger a surge and subsequent short squeeze.
Disclaimer: The content provided here should not be construed as investment advice. Investing in cryptocurrencies carries inherent risks, and capital loss is possible.
