Dogecoin is up about 10% over the past day, but long positions are piling up in the futures market, which may be something to watch.
Dogecoin Funding Rate Reaches Very Positive Values After Rally
As the on-chain analytics company explains FeelingDOGE traders are betting on prices continuing to rise as long positions are opened in the futures market.
The indicator of interest here is the “Binance financing rate“, which tracks the periodic fees that Dogecoin futures holders on Binance currently trade with each other.
When the value of this measure is positive, it means that long investors are paying a premium over short investors in order to maintain their current positions. Such a trend implies that the majority of the market has bullish sentiment.
On the other hand, negative values imply that a bearish mentality is the dominant force in the sector, as DOGE short traders currently prevail over buyers.
Now here is a chart that shows the Dogecoin Binance funding rate trend over the past month:
The value of the metric appears to have been positive in recent days | Source: Santiment on X
As seen in the chart above, the Dogecoin funding rate on Binance has turned very positive recently as the meme coin’s latest price rally took place.
This implies that speculators have jumped on the opportunity and are betting on prices continuing to rise. Since long positions began piling up in this latest futures craze, the asset has only continued its upward trend, suggesting that these traders’ bets have paid off so far. now.
However, if history is to be believed, the market, heavily dominated for a long time, has generally not ended well for DOGE. The chart shows that similar spikes in Binance’s funding rate have coincided with local cryptocurrency highs over the past few weeks.
The reason such a trend may exist is that as the futures market accumulates long positions, the chances of a long squeeze occurring become significant.
A “squeeze» refers to an event where a sudden price fluctuation triggers a cascade of liquidations in the sector. This cascade of liquidations only accentuates the swing, thus prolonging the rally/crash (depending on which side of the market takes the brunt).
When long positions are much more numerous, such a cascade of liquidations is naturally easier for them than for short positions. So, while Dogecoin is currently following strong momentum, all withdrawal could result in a long squeeze, which could lead the asset to record a notable decline.
Following the latest rally, Dogecoin surged towards the $0.087 level for the first time since April.
DOGE has observed some rapid growth in the past day | Source: DOGEUSD on TradingView
Featured image by Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net