Currency Economy

Crypto traders say negative funding rates are buy signals, but are they?

Cryptocurrency4 hours ago (Jun 26, 2021 07:40PM ET)Crypto traders say negative funding rates are buy signals, but are they?

Crypto traders say negative funding rates are buy signals, but are they?

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. This fee ensures there are no exchange risk imbalances.

Even though buyers’ and sellers’ open interest is matched at all times, leverage can vary, and when buyers (longs) are demanding more leverage, the funding rate turns positive. Thus, they are the ones paying the fees to the sellers (shorts).Bitmex BTC futures weekly funding rate, current. Source: TradingViewBitmex BTC futures weekly funding rate in 2020. Source: TradingViewHuobi 1-month Bitcoin futures basis rate. Source: Skew

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