Ethereum traders shorted ETH price in record numbers during the merger - a 50% crash?

Ethereum traders bet on 'sell the news' event on merge day as ETH exchange balance jumps.

Ethereum successfully completed its long-awaited transition to proof-of-stake via "merger" on September 15, as traders increasingly shorted Ether (ETH) in anticipation of a sell-off event information.

Ethereum funding rate plummets

Ether futures funding rates on major derivatives platforms fell below zero to their worst levels yet, before the merger. The rate fell to -0.6% on BitMex.

ETH Funding Rate History. Source: Coinglass

Funding rates are a percentage of fees paid to holders of short or long positions. The platform decides the fee based on the difference between the perpetual futures contract and the spot price.

Therefore, traders consider a bull market when the funding rate is positive. Conversely, a negative funding rate portends bearish sentiment in the market. Let's understand why with an example.

Currently, Ether's average funding rate is around -0.1%. In other words, traders with a short ETH position of $1 million are willing to pay those with long positions $1,000 every eight hours (depending on when the platforms recalculate funding rates ).

This shows traders' belief in a potential Ether spot price drop after the merger.

However, a consistently negative funding rate also increases the possibility of a short squeeze. A short squeeze occurs when an asset rises and short traders decide to hedge their position or are forced to do so via margin calls, thus adding more upward strength to the price of the asset. p> ETH technical prices suggest a 50% split

From a technical point of view, the price of Ether may drop by 50% in the coming weeks due to the format...