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Parabolic Rise of Bitcoin Futures Funding Rate Signal a Deeper Market Correction

Bitcoin price poised for a deeper dive as the futures funding rate explodes 

Bitcoin's recent rollercoaster ride has left investors questioning its future trajectory. Just weeks ago, it soared to a record high above $73,500, only to swiftly retreat to the $61,000 mark. Despite its current rebound to $67,600, there's uncertainty looming over whether new records are on the horizon.

According to a report by CryptoQuant, an important sentiment indicator, the futures funding rate, is hovering around unprecedented levels. This rate reflects traders' sentiments in the perpetual swaps market, with its magnitude tied to the number of contracts. Positive funding rates signal dominance by long position traders, who anticipate higher prices, willing to pay funding to short traders, betting on lower prices.

The significance of this indicator becomes clearer when considering past occurrences. In April 2021, funding rates reached similar highs before Bitcoin's subsequent plunge from above $60,000 to below $30,000 in just three months.

Coincidentally, recent data from the U.S. Commodities Futures Trading Commission (CFTC) highlights record futures short positions held by hedge funds and commodity trading advisors (CTAs). This juxtaposition of high futures funding rates and institutional investors' record short positions suggests that the ongoing correction in Bitcoin's price may persist, despite the recent bounce to $67,600.