Bitcoin Perpetual Futures Funding Rates Remain Low As BTC Makes New High

The top-cryptocurrency sets new highs, but funding prices for BTC perpetual futures still stay low. The estimate shows that investors are buying to keep Bitcoin, anticipating greater highs. The bullish momentum shows another record-breaking week in the market for cryptocurrencies.

The average funding rate for perpetual Bitcoin swaps across major cryptocurrency exchanges remains at 0.05 percent, according to data from blockchain analytics company Glass node. This is despite the Bitcoin rallying over 21% this week, breaching the $50k mark to set a new all-time high at press time of $57,752.78.The average funding rate remaining marginally above zero shows that, despite the record high price of the top cryptocurrency, traders doing perpetual Bitcoin swaps are not ready to enter short positions yet. In other words, they do not see a decline in the price.

In the futures market, traders can also exchange futures before the settlement date. This means it will change the price of futures. However, as the date of settlement approaches, the price of the future typically converges with the price of the underlying asset.

Perpetual futures vary in that they have no date of settlement; once liquidated, traders may keep them in perpetuity. Consequently, since they have no settlement date to anchor them, their prices may vary significantly from the underlying asset.

Therefore, a funding rate mechanism is used by major cryptocurrency exchanges to help keep the price of perpetual futures similar to the price of their underlying assets. The financing rate consists of the interest rate calculated by the exchange rate and the premium (the price difference between the asset and the future) determined by the demand.

The funding rate rises when the price of the perpetual future is substantially higher than its underlying asset, etc. Depending on whether it is positive or negative, the funding rate is charged by traders. In other words, when the funding rate is positive and vice versa, long position holders pay short position holders.

In this scenario, when Bitcoin exploded past the $40,000 level and then the $50,000 level, instead of using leverage, traders chose to buy and keep Bitcoin itself. The funding rate has remained poor as a result. Besides, traditionally, short-sellers came out in droves as the Cryptocurrency recovered without a break in sight.

This time, however, they seem to be non-existent, possibly because of Bitcoins increasing interest in “smart money” or public support by celebrities. And the market also seems to expect even more.