Chainlink has seen long contracts pile up on Binance over the past day, which could lead to a top for the cryptocurrency.
Chainlink funding rate for Binance has become very positive
This is evident from data from the on-chain analysis company Santimentthe Chainlink funding rate on Binance has now reached the highest level in about four weeks. The ‘funding rate’ refers to the periodic fee that derivatives traders on a given platform currently exchange with each other.
When the value of this measure is positive, it means that the long holders are currently paying a fee to the short investors to hold their positions. Such a trend suggests that a bullish mentality is dominant on the platform.
On the other hand, negative values imply that most LINK traders on the exchange share a bearish sentiment as the shorts outweigh the longs.
Here is a chart showing the trend in the Chainlink funding rate on the cryptocurrency exchange Binance over the past few months:
The value of the metric appears to have seen a large spike recently | Source: Santiment on X
As shown in the chart above, the Chainlink funding rate on Binance has taken significantly positive values following the asset’s rise above $16.
Longs are currently outpacing shorts by the highest ratio since November 11, when the cryptocurrency’s price reached its then annual high, which the coin has now surpassed.
Historically, long positions in the derivatives market have often been negative for the price. This is because a massive liquidation event, a so-called ‘squeeze’, is more likely to affect the party with the most positions.
In a squeeze, a sudden change in price triggers a large number of liquidations, which only further amplifies the swing and ultimately leads to a cascade of more liquidations.
Because Chainlink’s funding rate is significantly positive, it is more likely to be a long squeeze than a short squeeze. Last month the asset reached its local top under these conditions, so the same could repeat itself this time too.
However, if LINK sees a decline soon, the decline may not last too long. This is because there appears to be strong on-chain support between $14.4 and $14.8, as analyst Ali noted in an after yesterday.
Looks like LINK has little resistance ahead | Source: @ali_charts on X
In on-chain analysis, levels are defined as resistance and support based on the total number of investors who acquired their coins at said levels. The chart shows that the cost basis of 17,000 addresses is in the range of $14.4 to $14.8, meaning there may be strong support.
On the contrary, the levels above current are thin among investors, meaning they should not provide too much resistance if the rally continues.
“Now that $LINK has regained the $16 threshold, see if a little FOMO forms a local top, or if prices continue to climb towards $20 with little resistance,” Santiment notes.
LINKPrice
LINK had previously broken through the $17 barrier, but the asset has seen some pullback since then as it is now trading below the level again.
LINK has shot up during the past day | Source: LINKUSD on TradingView
Featured image from iStock.com, Charts from TradingView.com, IntoTheBlock.com, Santiment.net