The cryptocurrency market sees a surge in short interest for BNB token, an alarming sign of bearish momentum on the horizon.
As traders set their sights on the perpetual futures market linked to the BNB token, indicators suggest a challenging landscape unfolding due to several controversies surrounding the cryptocurrency.
Unsettling data fuels market anxiety
Key indicators tracked by the cryptocurrency data provider, Coinglass, reveal that the open interest and volume-weighted funding rates in BNB perpetual futures have plunged to a record low of -0.18%.
This figure, the lowest since the end of April, indicates that the shorts โ or positions that profit when prices fall โ are taking the upper hand.
As a result, these traders are willingly compensating longs to maintain their bearish stance. With funding rates being charged every eight hours, the bearish momentum is continuously fueled.
According to the pseudonymous co-founder of Pear Protocol, Huf, the BNB token is a target of heavy shorting, evidenced by the deeply negative funding rates.
Contributing to this hostile sentiment are recent high-profile resignations, inconsistencies relating to BCH withdrawals from Binance.US, and the pending legal action against Binance’s CEO, Changpeng “CZ” Zhao, by the Department of Justice.
BNB’s struggles deepen amid staff exits and legal challenges
BNB, the cryptocurrency token launched by Binance, often mirrors the fortunes of the exchange platform. Recently, Binance’s challenges have escalated, marked by worldwide regulatory pressures leading to significant staff cuts.
Three top officials recently resigned, attributing their departure to CZ’s management of the ongoing DOJ investigation into potential money laundering.
Over the past weekend, CZ tried to quell market fears, referring to the layoffs as involuntary terminations, and even refuted the layoff figures reported in the media, dubbing it as FUD (fear, uncertainty, and doubt).
His attempts, however, have done little to reassure the market. The persistently negative funding rates suggest that the market remains anxious, with some predicting more turbulence ahead.
BNB perpetual futures and the threat of a short squeeze
The overall market nervousness surrounding BNB is further amplified by recent legal developments involving Ripple Labs.
Traders are still weighing whether the favorable ruling for Ripple in its case against the U.S. Securities and Exchange Commission could potentially aid Binance in its ongoing legal battle.
The term ‘short squeeze’ describes a rapid upward price movement driven by bearish traders forced to abandon their negative bets. Such a situation can trigger a price surge when the market is heavily saturated with bearish activity, as is currently the case with BNB perpetual futures.
Even a slight upward price movement could cause short sellers to close their positions in a hurry, pushing prices even higher.
Cryptocurrency trader, Skew, suggests that a move above $265 might prompt some short covering. However, as long as BNB trades below this threshold, the potential for a short squeeze remains a pertinent threat.
At the time of writing, the price of BNB stands at $243.91, highlighting the volatile state of the market and the uncertainties facing the BNB token.
As the drama unfolds, the cryptocurrency market continues to watch BNB’s future closely, grappling with the realities of regulatory pressure, leadership challenges, and market sentiment.
