BTC longs dominate, while ETH shorts rise

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Data shows that Bitcoin and Ethereum have developed a divergence in their funding rate metrics, with traders going long on BTC and short on ETH.

Bitcoin and Ethereum funding rates show opposite values

In a new post on X, on-chain analytics firm Santiment talked about how Bitcoin and Ethereum funding rates have fared amid recent market volatility.

Bitcoin and other cryptocurrencies have experienced sudden price fluctuations over the past day, with BTC’s price initially rising quickly to $90,300, but then plummeting just as quickly towards $86,000. Since then, the coin’s decline widened to $85,300.

While BTC has returned to roughly the same levels as before the flash surge, the same was not true for Ethereum. ETH rose to $3,000, then plummeted to $2,830, and then fell further to around $2,790. Before the volatility storm, the cryptocurrency was trading around $2,920.

Differences in price trends could be a potential factor behind the divergence formed in derivatives market sentiment as measured by funding rates.

Funding rates track the regular amount of fees that derivatives traders are paying across all centralized exchanges. A positive value of the indicator indicates that long investors are paying short investors, and a negative value means that bearish positions outweigh bullish positions.

Here, a chart shared by Santiment shows how Bitcoin and Ethereum funding rates have changed over the past month.

As shown in the chart above, Bitcoin’s funding rate has been positive for the past few days, indicating that bullish sentiment prevails among traders. This trend has been maintained even after the price changes.

Ethereum also observed a positive funding rate before volatility increased, but unlike BTC, this trend did not persist. Since ETH experienced a rapid rally and flash crash, the indicator has turned red, indicating that shorts are starting to outperform longs.

However, the fact that the bullish sentiment surrounding ETH has waned may not actually be a negative. Historically, highly leveraged long positions have led to rapid liquidation events and volatility, Santiment said. This trend was also seen during the recent rise and fall.

Therefore, the volatility risk may be lower considering Ethereum’s current negative funding rate. That being said, Bitcoin’s long-term heavy market could still be relevant to the cryptocurrency.

As Santiment explains, “All assets still move with Bitcoin. This means Bitcoin funding rates need to remain neutral or go negative for altcoins to rebound, justifying a clear path back to $100,000.”