Global perpetual futures funding rates reached a new all-time high of 66% annualized as Bitcoin surged above $45,000 on Monday. The data, provided by crypto services provider Matrixport, highlights the bullish sentiment in the market as traders eagerly await a potential Bitcoin ETF approval from the U.S. Securities and Exchange Commission (SEC).
Bullish surge in Bitcoin perpetual futures market
In a remarkable turn of events, the Bitcoin perpetual futures market has witnessed a surge in funding rates, leaving traders paying a premium for long positions. As Bitcoin surpassed $45,000 for the first time since April 2022, the global average perpetual funding rates soared to an unprecedented 66% annualized during the Asian trading hours. These perpetual contracts, which do not have expiration dates, rely on funding rates to maintain their prices in sync with the prevailing cryptocurrency market rates.
Perpetual funding rates are critical in determining the pricing dynamics of these futures contracts. When the funding rate is positive, it signifies that perpetuals are trading at a premium compared to the spot price of Bitcoin. In such cases, long traders must pay shorts to keep their positions open. Conversely, negative funding rates indicate the opposite scenario: shorts compensate for longs.
Matrixport’s insight on funding rates
Markus Thielen, the Head of Research and Strategy at Matrixport and Founder of 10x Research offered his perspective on the current funding rate situation. He remarked, “This morning, the funding rate is reaching a new high at +66%. This means longs pay shorts 66% per year to stay long.” Thielen further emphasized that the elevated funding rates during the year-end holiday season suggest a strong bullish sentiment among crypto traders.
Interestingly, the sustained elevation of Bitcoin’s funding rate during the holiday period has raised eyebrows in the crypto community. According to Thielen, this phenomenon implies that traders remain exceptionally bullish and anticipate the SEC’s imminent approval of a Bitcoin ETF. The optimism surrounding potential ETF approval has driven Bitcoin’s impressive 56% rally during the final quarter of 2023.
While the surge in funding rates may fuel the bullish sentiment, it comes with a word of caution. Excessive funding rates can burden long traders when the market ceases its upward trajectory. This scenario often leads to the unwinding of bullish positions and price corrections.
Bitcoin’s unwavering momentum
As of the time of writing, Bitcoin shows no signs of slowing down, with its price comfortably trading above the $45,000 mark. This remarkable surge is a testament to the market’s unwavering optimism and anticipation regarding the potential SEC decision on Bitcoin ETFs, which, according to Reuters, could be announced as early as Tuesday. Bitcoin Funding Rates Soar to 66% Annualized Amid Anticipation of SEC ETF Decision