Bitcoin Surges Past $45,000, Making Long Positions in Perpetual Futures Costlier than Ever
Early Monday, bitcoin surged past $45,000 for the first time since April 2022, causing long positions and leveraged bullish bets in the perpetual futures market tied to the cryptocurrency to become costlier than ever.
According to data tracked by crypto services provider Matrixport, global average perpetual funding rates rose to a record 66% annualized during Asian trading hours. Perpetual futures are futures with no expiry that use the funding rate mechanism to keep prices in sync with the cryptocurrency’s going market price. Positive funding rates mean perpetuals are trading at a premium to the spot price, and long positions are paying shorts to keep their positions open. Negative rates indicate the opposite. 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,” said Markus Thielen, head of Research and Strategy at Matrixport and founder of 10x Research.
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,” noted Thielen.
However, it is important to note that super-high funding rates often become a burden for long positions when the market stops moving higher, potentially leading to the unwinding of bullish bets and a 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). According to Reuters, the decision may come as soon as Tuesday.