Tracking data from Matrixport reveals that the global average perpetual funding rates hit a new high of 66% annually early on Monday.
Holding onto long positions or bullish bets with leverage in the perpetual futures market linked to bitcoin became more expensive than ever on Monday, especially as bitcoin surpassed $45,000 for the first time since April 2022. Matrixport’s data, a crypto services provider, indicates that global average perpetual funding rates rose to a record 66% annually during the Asian trading hours.
Perpetuals are futures contracts without an expiration date that use the funding rate mechanism to align their prices with the current market value of the cryptocurrency. Positive funding rates mean perpetuals are trading at a premium to the spot price, and long positions are paying short positions to keep their positions open. Negative rates indicate the opposite. Funding rates are collected by exchanges every eight hours.
Markus Thielen, head of Research and Strategy at Matrixport and founder of 10x Research, explained, “This morning, the funding rate is reaching a new high at +66%. This means long positions pay short positions 66% per year to stay long.” He added, “Surprisingly, the bitcoin funding rate has remained elevated during the holiday period, indicating that crypto traders have stayed very bullish and expect an imminent bitcoin ETF approval.”
It’s important to note that extremely high funding rates can become challenging for long positions when the market stops moving higher, potentially leading to the unwinding of bullish bets and a pullback in prices.
As of the latest update, bitcoin is showing no signs of a slowdown, with prices trading above $45,000. The cryptocurrency experienced a 56% rally in the final quarter of 2023, driven by speculation about the potential approval of one or more spot-based BTC exchange-traded funds (ETF) by the U.S. Securities and Exchange Commission. According to Reuters, a decision on this matter may be announced as soon as Tuesday.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoassets.