Bitcoin Perpetual Swap, the most liquid and traded futures product, is a contract that allows traders to leverage their leverage to infer the price of Bitcoin. Although the amount of longs and shorts is always the same, the position of these contracts on spot Bitcoin prices shows a bullish / bearish bias in the derivatives market.
If the contract price of a permanent futures contract (a futures contract that does not expire) exceeds the bitcoin price of the spot market, the funding rate of the permanent futures will be positive. In other words, long pays a short at a fixed rate of the expected position size. The reverse is also true.
Bullish biases usually exist in the futures market. Throughout most of 2021, perpetual futures contracts continue to lead the spot market significantly, demonstrating a strong bullish bias from speculators. Recently, funding has turned negative, indicating that permanent futures are trading below the spot. This is not the result of cascade clearing, which pushes up prices, but the result of a reversal of sentiment and market expectations.
Over the last 24 hours, permanent futures funding has been minus 8.23% on an annual basis. In other words, Short pays Long the expected position size of 8.23% per year. While macroeconomic outlooks are becoming more uncertain and the downside of Fed’s hawks could certainly expand, it’s a good sign that Bitcoin bulls continue to raise negative funding. ..
Bitcoin’s Hourly Permanent Funding Rate Average Daily Rate
Below is the same chart, but with a 7-day average to adjust the variance.
Bitcoin Hourly Permanent Financing Rate Average Annual Rate for 7 Days
What should be noted over the next few weeks is the rise in negative funding and open interest, similar to what was witnessed in the summer of 2021.
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