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Bitcoin Bullish Bets Costlier Than Ever as Funding Rates Hit Record 66%
Data tracked by Matrixport show global average perpetual funding rates rose to a record 66% annualized early Monday.
Updated Jan 2, 2024, 3:07 p.m. Published Jan 2, 2024, 6:27 a.m.
Holding long positions or leveraged bullish bets in the perpetual futures market tied to bitcoin became costlier than ever early Monday as bitcoin topped $45,000 for the first time since April 2022.
Data tracked by crypto services provider Matrixport show global average perpetual funding rates rose to a record 66% annualized during the Asian trading hours.
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Perpetuals are futures with no expiry that use the funding rate mechanism to keep prices for perpetuals in sync with the cryptocurrency's going market price. Positive funding rates mean perpetuals are trading at a premium to the spot price, and longs are paying shorts to keep their positions open. Negative rates indicate otherwise. Exchanges collect funding rates every eight hours.
"This morning, the funding rate is reaching a new high at+66%. This means longs pay shorts 66% per year to stay long," Matrixport's head of Research and strategy and 10x Research's founder Markus Thielen, said.
The chart shows that the funding rate has remained elevated throughout the year-end holiday season, indicating a bullish mood in the market.
"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," Thielen noted.
Note that super-high funding rates often become a burden for longs when the market stops moving higher, leading to the unwinding of bullish bets and price pullback.
As of writing, bitcoin shows no signs of bullish exhaustion, with prices trading above $45,000. The cryptocurrency rallied over 56% in the final quarter of 2023 as speculation gripped the market that the U.S. Securities and Exchange Commission would approve one or more spot-based BTC exchange-traded funds (ETF). Per Reuters, the decision may come as soon as Tuesday.
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