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Home»ADOPTION NEWS»Despite falling spot prices, Bitcoin and Ether perpetual futures funding rates remain high.
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Despite falling spot prices, Bitcoin and Ether perpetual futures funding rates remain high.

By Crypto FlexsMarch 19, 20244 Mins Read
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Despite falling spot prices, Bitcoin and Ether perpetual futures funding rates remain high.
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Bitcoin and Ether perpetual futures funding rates remain high despite spot prices for each asset falling 7% and 6%, respectively, over the past 24 hours. Global cryptocurrency market capitalization declines 5.8% It reached $2.5 trillion in the last 24 hours, according to CoinGecko data.

“Despite these large spot moves, perpetual funding rates on retail-focused exchanges are still 20-30%, meaning speculators are still adding leveraged buying to dips,” a QCP Capital Markets report on Tuesday said. Yes.

Funding rates suggest further declines are possible.

However, QCP Captial analysts suggested that the increased level of funding could indicate that the current price correction in the cryptocurrency market still has a long way to go. “The forward curve is still surprisingly high. Even now, you can secure a 23% risk-free rate of return on ether April spot forward spreads. Desks are still seeing strong interest in selling these spreads. We believe they can stay that way. We don’t expect it to rise for much longer, especially if the market continues to fall,” the QCP Capital analyst added.

According to André Dragosch, head of research at ETC Group, current funding ratios indicate a higher downside potential for both assets.

“This is, in my opinion, corroborated by other sentiment and positioning indicators as well, but any kind of pullback should be viewed as a short-term opportunity to increase exposure ahead of the upcoming April halving,” Dragosch told The Block.

High funding rate despite the spot economic downturn

According to The Block’s data dashboard, the average annual Bitcoin funding rate for perpetual futures on major derivatives exchanges such as KuCoin, Huobi, and BitMEX is still over 20%.

Additionally, according to The Block’s data dashboard, ether perpetual futures funding rates on several derivatives exchanges are significantly higher than Bitcoin. The daily average of annual Ether funding rates for perpetual futures on Gate.io, BitMEX, Kucoin, and Huobi all still exceed 20%. Ethereum funding ratio remains very high, exceeding 45% on Gate.io and 39% on BitMex.

Speculators still holding long positions

According to cryptocurrency derivatives trader Gordon Grant, high funding ratios indicate speculator length, or the degree to which speculators are willing to maintain their positions in the market. He added that the current high funding ratio is a sign of the presence of “speculators with diamond hands, but speculators nonetheless.”

Grant told The Block that recent trends suggest that tradable physical Bitcoin is limited relative to demand. “As spot Bitcoin ​​ETF assets under management continue to expand and Bitcoin is effectively locked in the custodial state that underlies its stock, the value of Bitcoin that someone ultimately needs to hold to support a futures position becomes smaller. “High funding rates are a way to encourage people in the market to hold and pre-sell Bitcoin or Ethereum spot,” he added.

Grant suggested that compared to the corresponding period in the 2021 Bitcoin price cycle, there is currently little centralized finance (CeFi) lending market available to alleviate funding pressures. As a result, “interest rate markets can’t function as well as they used to,” Grant added.

According to The Block’s pricing page, the largest digital asset by market capitalization is up 5.3% in the last 24 hours and is currently trading at $64,357 as of 12:21 a.m. ET. The GM 30 index, which represents the top 30 cryptocurrencies, rose 6.20% to 141.77 over the past 24 hours.


Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.

© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.

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