Bitcoin Perpetual Futures Hit Record Funding Rates Amid Bullish Market Sentiment

Bitcoin Perpetual Futures Hit Record Funding Rates Amid Bullish Market Sentiment

Crypto News – Matrixport, a cryptocurrency services provider, has recently observed an unprecedented surge in global average perpetual funding rates, reaching an all-time high of 66% annualized early Monday. This notable increase coincided with Bitcoin’s price escalation, exceeding $45,000 for the first time since April 2022.

Perpetual futures, a type of derivative in the Bitcoin market without an expiration date, use a funding rate mechanism to align the perpetual prices with the current market value of the cryptocurrency. A positive funding rate implies that perpetuals are priced higher than the spot price, necessitating long position holders to compensate short sellers to maintain their positions. Conversely, negative rates suggest the opposite. It’s worth noting that these funding rates are recalculated and applied by exchanges every eight hours.

According to Markus Thielen, Head of Research and Strategy at Matrixport and founder of 10x Research, “This morning, we’ve seen the funding rate soar to a new zenith of +66%. Essentially, this translates to long position holders paying an annual rate of 66% to short sellers to sustain their long positions.”

The data further indicates that the elevated funding rate persisted throughout the recent holiday season, reflecting a persistently bullish sentiment among cryptocurrency traders. Thielen remarked, “Contrary to expectations, the Bitcoin funding rate maintained its high level during the holiday stretch. This suggests that traders remain optimistic, anticipating the imminent approval of a Bitcoin ETF.”

It’s crucial to note, however, that excessively high funding rates can become a financial strain for long position holders if the market ceases its upward trajectory. This often leads to the liquidation of bullish bets and a subsequent decline in prices.

At present, Bitcoin exhibits no signs of diminishing bullish momentum, with its value holding steady above $45,000. The cryptocurrency witnessed a remarkable rally of over 56% in the final quarter of 2023, fueled by speculations that the U.S. Securities and Exchange Commission might greenlight one or more spot-based Bitcoin ETFs. According to a report by Reuters, a decision on this matter could be announced as early as Tuesday.