Get started

Fundingrates

How to use futures funding in a trading strategy?Funding , also known as the funding rate, plays a crucial role in the dynamics of perpetual futures contracts. Its primary purpose is to maintain price parity between perpetual contracts and the underlying assets in the spot market. For instance, it ensures that the price of a BTCUSDT futures contract closely tracks the BTC spot price. Traders participate in funding by either paying or receiving the funding rate, which depends on the overall market conditions. In simpler terms, a trader can either incur the funding cost or earn from it. Some traders strategically use the funding mechanism to generate profits, not just from trading contracts but also from the funding rate itself. The necessity for funding arises to prevent significant disparities between perpetual futures contract prices and the actual assets. This mechanism helps smoothen price fluctuations in perpetual contracts, keeping them as close as possible to spot prices. It's important to note that funding is distinct from trading commissions, as funding rates are payments made by traders to other traders. On certain exchanges, funding comprises two components: a fixed percentage and a "premium" that adjusts based on the deviation between futures and spot prices. Typically, funding rates are calculated as a fraction of a percentage of the position size and depend on the magnitude of the deviations. Most exchanges settle funding payments every hour, four hours, or eight hours. Unlike trading commissions, which are charged for specific actions like opening or closing a position, funding rates accumulate continuously as long as the position remains open. Example When the funding rate is positive, it implies that long position holders pay short position holders. Conversely, when it's negative, short position holders pay long position holders. For example, if you hold a long perpetual contract at $5,000 and the funding rate is positive, you will pay a percentage of $5,000 (e.g., $0.76) to the trader holding a short position over a set period (e.g., 8 hours). Conversely, a negative funding rate suggests that the contract price has fallen below the spot price. To balance this, the exchange collects funding from short sellers and distributes it to long sellers. This encourages participants to avoid shorting and favor long positions, as the rate increases if the price continues to drop. In such situations, shorting becomes less profitable, prompting participants to close short positions, which, in turn, exerts upward pressure on the futures price to align with the spot price. The closer the futures price stays to the spot price, the lower the funding rates are. Thus, it's in the interest of traders to prevent deviations between contract and spot prices. The exchange continuously incentivizes traders to maintain this balance. In summary: Positive funding rate: Contract price > Spot price; long positions pay short positions. Negative funding rate: Contract price < Spot price; short positions pay long positions. The funding percentage accumulates as long as the position is open, and it can fluctuate between positive and negative based on market conditions. Each exchange may have its unique formula for calculating funding rates. For trading strategies, traders often compare funding rates with the prevailing market trend. The logic is simple: - Positive rate suggests the contract price is above the spot price, making short positions favorable. - Negative rate implies the contract price is below the spot price, making long positions attractive. If funding rates and the trend align, it can provide traders with an additional advantage. However, it's essential to regularly monitor funding rates to avoid unexpected losses when employing funding-based trading strategies. Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch! ✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes. --- • Look at my ideas about interesting altcoins in the related section down below ↓ • For more ideas please hit "Like" and "Follow"!
BITSTAMP:BTCUSDEducation
by Crypto4light
Whales are luring trader to build short positionWe are in the Phase 4 (Refill short fuel) of bulls attacked and whales are luring trader to build short position COINBASE:ETHUSD COINBASE:BTCUSD Phase 4. KD80 -> KD 60-70 (Mild) or KD 40-50 (Aggressive): Market makers completed the first short-squeeze and most retail investors started to open the long position. Therefore, the price correction will happen in the short term because the fuel of short-squeeze is not enough. See the Funding Rates of BTC(&ETH), the fuel of short-squeeze is not enough. upload.cc Thus, we are in the Phase 4 (Refill short fuel) of bulls attacked and whales are luring trader to build short position. There are two mode to lure trader building the short position: 1. KD from 80-100 fell back to 60-70 (Mild): ETH price 2950-3100USD or 2. KD from 80-100 fell back to 40-50 (Aggressive): ETH price 2700-2800 USD Ps: If you want to understand the complete process of strong bulls attack (5 steps), please check my previous articles :D. ---------------------------------- Analyst of cryptocurrency Yu-Shiuan Chen (CQ & Tradingview Taiwan)
COINBASE:ETHUSDLong
by Analyst_YuShiuanChen
4
BTC expected to be traded at a discount this weekend. BTC looks to be on sale in the coming days. Approach this weekend with caution if you’re re trading short term action. I would personally sit this weekend out all together. This comes from a combination of positive funding rates on-chain and a slow bleed over the past 24 hours leading into the weekend that has traditionally been red. This price action indicates that we may see a test to the bottom of the bollinger bands which brings us to a sub 60k level. This price action is generally brought on by large holders attempting to grab larger amounts at a discounted rate(as quickly as possible) Liquidation levels are high at the 58k-59k level which could cause a cascading effect of lower trading leading into next week. Approach this weekend with caution if you are placing new longs. I wouldnt lose too much sleep if we see a larger than normal big move down as it should be temporary. If you are utilizing leveraged longs heading into the weekend….May god have mercy on your soul. On a macro scale, I still remain extremely bullish on BTC and see it closing out the month at yet another record close.
COINBASE:BTCUSDShort
by ChimeraHoldings
Don't Fade Sh*tcoins when funding is ungodly! Please refer to this additional chart for reference (switching to binance SHIBUSD because coinbase went down soon after the squeeze) coinalyze.net This analysis refers to the pump and short squeeze that occurred today on COINBASE:SHIBUSD and FTX:SHIBPERP from 0800 UTC to 1900 UTC OCT 27 Before 0800 UTC SHIB had just experienced a drop caused by long liquidations, it seemed to reset the funding rate but as seen on the coinalyze chart funding started to creep up again as price broke ATH at the psychological level of 0.00006 As price approached to the next psychological level of 0.00007 funding creeped to an incredible -0.05% funding rate, meaning longs were in profit and getting paid 0.05% to continue longing. This negative funding rate was a sign of the amount of shorts growing on FTX:SHIBPERP Additionally around 1500 UTC SHIB flipped DOGECOIN market cap of $31billion. It then begin to form a rising wedge from 1530 to 1855 UTC and this is where things got interesting... 2 catalysts played a major roll in the explosive short squeeze that followed at 19:00: 1. First catalyst was spot on COINBASE:SHIBUSD Coinbase exchange began to separate from futures price significantly. This backwardation contributed to the huge negative funding rate throughout the development of this wedge. Towards the end of the wedge spot price separated from futures price by 10% or more. This signified that the rally was being led by retailers buying spot rather than futures traders buying longs. 2. Second catalyst was the amount of shorts that kept growing without liquidations by futures traders. This was seen by the large increase in open interest during the wedge development while liquidations stayed eerily low yet funding stayed high. The boom happened at 1855 UTC and this is my theory what happened... On twitter there was many large "assumed" whale accounts that were publicly stating they were shorting SHIB, so I assumed there were also other whales who had large short positions as well. Many people saw this wedge developing and therefore I assume set their stop loss or liquidation levels right above the wedge at just above ATH. However I don't think that is what triggered the wedge break... What triggered the wedge to break up I believed was due to the funding payment about to happen at 1900 UTC. You could argue the break was inevitable but it was very coincidental that at 1855, with funding being at the highest of the hour, some whales on FTX (where funding is charged hourly) decided to close and cover their shorts to avoid the payment. This bumped the price up just enough to liquidate the first batch of shorts, skyrocketing spot price and triggering an upwards cascading liquidation event. Once the first batch of shorts cleared, futures price quickly began to catch up to spot price, and arbitration engines kicked into overdrive trying to level out the markets to Coinbase's spot price. Shorts = Rekt Now its Oct 28 0200 UTC and another wedge is developing, however, funding rates have "normalized" so we'll see if it triggers another leg up, or if the bears will win today.
FTX:SHIBPERP
by bimmeresty
1
Support Hit 💸 Bear Trap 👿 $40K In A Week ◀️Support Hit 💸 Bear Trap 👿 $40K In A Week ◀️ "Look someone opened a huge short... Oh, he was too late." KEY POINTS: - Bears Are Tired: Multiple Bullish Divergences On RSI - Bulls Are Still Energetic: Higher Highs on RSI - Historic Invincible Support Hit - Dumb Money Opens Shorts (At Support...) - Smart Money Bought The Dip - Psychologically Tempting Target: $40k - Funding Rate Favors Longs - Excellent RRR: 400% 🌌 OUR SIDE: POSITION: Long LEVERAGE: x10 ENTRY: $32 000 STOP LOSS: Daily close below $29 900 and staying there for six hours TARGET: $40 000
BINANCE:BTCUSDLong
by Elysian_Mind
5
BTCUSD - Help! Bitcoin is stuck!!!I know ... I know ... a lot of us would like to erase that drop as fast as possible and continue the bull run, but what is stopping it? We hear stories of whales buying the dip, of stable coins being moved to exchanges ready to buy Bitcoin ... So why don't they, and why is price not resuming its upward trend? 📉 THE BEAR SCENARIO Well, we know that there is a lot of leveraged trading going on in the markets, and a lot of longs have been liquidated ... With the funding rate being at near zero, there is not much incentive to enter again, and we've had no convincing confirmation that the downward move is completely over. One would think twice before going long at these levels when not buying spot. Other than that, we are currently at the level that started the last move up. Bears convincingly dropped below that level and are selling anything that tries to breach that level (at least the last couple of days). So we are still on the edge of that bear territory, and bears are still in charge. Some say we might even go test 20k again fi bulls can't break this level soon. 📈 THE BULL SCENARIO For the bull run to resume, we'll need to break and close above that level on a daily timeframe. Ideally we'd have to go back above 45k USD and close a daily candle above that level. We'll need good volume to achieve that, but markets are slow now ... A hike of the funding rates (as much as I don't like leveraged trading), would definitely help. On-chain analysts like Willy Woo and William Clemente III are convinced that the bull run is not over and that we'll reach six figure BTC before the end of this cycle. But if even news like $PYPL allowing crypto withdrawals is barely moving the markets, the big cannons will be needed to resume the bull trend. ⚠ STRENGTH NEEDED Anything between 39k and 45k is No Man's Land and could take BTC up or down, depending on the strength of the buyer or seller activity ... 🙌🏽 THE GAME IS ON! ❓ Who do you root for? What is your view? Do you see us continuing the rally, or do you see us go further down? Let me know in the comments. If you liked this analysis, a 👍🏽 would be appreciated.
COINBASE:BTCUSD
by Nico.Muselle
20
BTC- Key things to look out forTotal exchange volume, after reached ATH in early Jan, has since come back down, but is still much higher than it was a year ago. Fundamental- Grayscale’s Crypto AUM has recently surpassed $30 Billion lvl and it was mostly driven by hedge fund involvement. Average commitment is in uptrend as well. Fidelity Digital Assets President Tom Jessop is bullish on BTC along with Ray Dalio and Jordan Belfort (probably shouldn't mention him in the sentence as Dalio), both of them have been vocal critics of BTC until recently. Ray Dalio even went as far as claiming BTC as an alternative to gold-like assets. Crypto exchange River Financial recently launched a mobile platform for iOS, aiming specifically at the demographic over 50s. If boomers join the BTC bandwagon, their wealth can become a powerful driving force of BTC's price Derivative- CME's leveraged funds have been steadily reducing their short positions since late Dec. BTC futures volume, after reached its peak in mid Jan, has since come back down, but is still hovering around Dec. lvl. BTC futures OI on Binance, Okex and CME has exceeded 2 billion few days ago and is still at elevated lvl despite a minor drop today. Funding rate suggests that traders are moderately bullish On-chain- Recently, over $550 Million of BTC was transferred out of Coinbase Pro, which potentially indicated less selling pressure and more Hodl activity. The # of Bitcoin whales (entities holding ≥ 1k $BTC) is still increasing In January, more than 22.3 million unique addresses were active in the network sending or receiving $BTC, the highest monthly number in Bitcoin's history to date SOPR has recently reached 1, which means ppl are now less willingly to sell below the break-even price unless majority of them believe price will drop further because we are still in the bear market, which is an unlikely scenario. This could potentially mean the end of profit-taking and the resuming of uptrend. USDT issuance continues to climb up steadily so is StableCoin Supply Ratio (SSR), which might indicate more buying pressure to push up the BTC price.
by Libratus
2
Why Bitcoin ATH is once again looking dangerous for longsFollowing my previous video regarding funding rates and perpetual swaps vs spot we are back at it again. Bitcoin is once again suggesting that swaps are way too aggressively long at the top pushing funding rates into high premiums rates in some exchanges. I do not think that shorting bitcoin against weekly and monthly uptrends trends is good idea but there is defiantly great trades that can be now done on the intraday WHILE funding rates and perp/spot basis keep trading at significant premiums.
BITSTAMP:BTCUSD
by D7R
13
Bitcoin Perpetual Swaps v Spot basis suggest overlev longs Bottom indicator showing some important Perpetual Swaps contracts vs Coinbase price basis baseline = spot price basis positive = swaps trading at premium (generally strong over-leveraged LONG exposure ), push longs paying funding to shorts basis negative = swaps trading at discount (generally strong over-leveraged SHORT exposure ), push short paying funding to longs We can observe ongoing existence of what is likely to be over leveraged longs. The swaps been trading significantly at premium. Trading at premium mean that swaps funding rates rise substantially and consistently putting pressure on longs since longs pay shorts. Market-markers are on the receiving side of that funding to offset the risk of being against the trend while providing liquidity to a market that may for the moment may be losing some steam on the demand side waiting for a pullback Price been trading consistently above the trendline which remain intact but the swap-spot basis suggest a strong pull may occur in the future. Staying full long (specially if entry is very recent) in what looks like a very possible local top, even if we wick towards 20.1k, is very risky.
BITSTAMP:BTCUSD
by D7R
7
Still going strong - Any last targets?Hey there, basically anything you need to know on my outlook on bitcoin is displayed on this chart. Our last targets are at 9800 (red box) and 10300 (last swing high). Bitcoin keeps strong on all time frames, but is a bit overextended on the 4h chart. Especially when looking at the Bitmex Funding Rate it kinda tells a different story and displays that bulls are paying the shorts. Fortunately this is a contrarian indicator and doesn`t always predict price drops/rises. If you require further information, take a look at my recent posts on which I explained in detail what I am looking at. Also check out my YouTube channel: [ b]Enlightened Trading for further information on my view of the current market. So far so good. Targets where reached and held nicely. Bitcoin really seems to change its market structure to bullish long term. Cheers, Konrad
BITSTAMP:BTCUSDLong
by EnlightenedTrading
Whale Reaccumulation Zone?Pattern suggests possible reaccumulation by a handful of whales on Bitfinex, where Longs skyrocket to all time highs on taps to the .618 and .65 retraces of the macro bull run which began back in April. Meanwhile funding rate on Bitmex remains fairly neutral, suggesting the Longs are from Bitfinex only. A long squeeze, if it happens, may not kick in fully unless we break the local low of $6618 (on Bitfinex). I remain short, but finding reasons to be careful.
BITFINEX:BTCUSDShort
by mastaplan
Bitcoin Price Action Update (day 350) Disclaimer: If you are primarily interested in copying other people’s trades then this is not for you. However, if you are willing to put in the work that it takes to learn how to trade for yourself then you have found the right place! Nevertheless please be advised that you can give 10 people a profitable trading strategy and only 1-2 of them will be able to succeed long term. If you fall into the majority that tries and fails then I assume no responsibility for your losses. What you do with your $ is your business, what I do with my $ is my business. Sawcruhteez Strategies: Comprehensive Trading Strategy - Consensio | Comprehensive Trading Process | How to BUY THE DIP | Advanced Dollar Cost Averaging Methods Consensio: Testing 4h 50 EMA Horizontals: R: $11,400 & $12,400 | S: $10,500 & $8,900 Trendline: See below Parabolic SAR: W: $9,395 | D: $13,858 Futures Curve: Contango with 4.3% spread. Great article about this recently from Ugly Old Goat! Funding Rates: Longs pay 0.3159%, has been persisting over 0.1% over the last couple days BTCUSDSHORTS: Long short ratio doesn’t look bad but I trust the funding rate TD’ Sequential: Daily G8 | Weekly G3 Ichimoku Cloud: Weekly recently turned bullish and is acting as support Average Directional Index: Looks ready to roll over soon on the daily: Price Action: 24h: -13.18% | 1w: +10.67% | 1m: +31.95% Summary: This market was overdue for a correction at $5,800. Even moreso at $7,500 - $8,000. Now it looks like it will finally happen. I have exited my margin longs and will be looking to sell spot on this bounce. A 15m falling wedge with a $12,400 target recently confirmed. I do not usually pay attention to patterns on lower TF’s but will when the market is really moving. If that target is reached I will be watching for ABC correction on 4h: That is the most likely outcome in my opinion, but we will have to wait and see what happens. I am very intrigued by how this trendline has held as support: That is intriguing but I do not expect it to hold. I recently posted an update with buy signals from the Ichimoku Cloud and TD Sequential. If that entry was taken I would be looking to fully exit, or set a breakeven stop at a minimum. Right now it is time to control risk and / or hedge. Take some profit while it is still on the table and then keep a significant amount of exposure. Taking profit will improve the cost basis and will protect from the downside. If it continues taking off then great! If not then you will be ready to buy the dip. I outlined my major areas of support where I will be planning to buy the dip in today’s podcast on Youtube so give that watch if you want to know where I’m looking!
BITMEX:BTCUSD.PShort
by Sawcruhteez
8
Bitmex Funding Rate IndicatorDisclaimer: If you are primarily interested in copying other people’s trades then this is not for you. However, if you are willing to put in the work that it takes to learn how to trade for yourself then you have found the right place! Nevertheless please be advised that you can give 10 people a profitable trading strategy and only 1-2 of them will be able to succeed long term. If you fall into the majority that tries and fails then I assume no responsibility for your losses. What you do with your $ is your business, what I do with my $ is my business. Click here for my Comprehensive Trading Strategy | Click here for my Comprehensive Trading Process | Click here to learn about the 2 BTC' to 20 BTC' Trading Challenge I consistently track the funding rates on Bitmex as a way to understand if one side of the trade is too crowed. This can be a very powerful indicator for identifying squeezes, both long and short, before they happen. This is currently the most important indicator for me in regards to the Bitcoin Price Action. Almost every metric shows this market as being overbought over the last couple weeks while it has tested the major area of resistance at $5,800 - $6,500. The majority of people did not expect this rally to get past $6,000 before a significant correction and I was certainly one of them. This is exactly the type of environment when one side of the trade will get too crowded and that appears to be what happened over the past week. The indicator that I'm using can be found under "Bitmex Funding Bars" and it is a great way to illustrate how powerful this tool can be. I drew two horizontal lines which indicate buy and sell signals. The sell signal occurs when longs pays shorts 0.07%+. The sell signal occurs when shorts pay longs 0.08%+. These rates must persist for a week before the signal triggers. The vertical lines represent hypothetical buys / sells based on this indicator. As you can tell it has been a great way to forecast upcoming price movement throughout this bear market. A good confirmation for this indicator is the futures curve. Backwardation occurs when spot is more expensive that the futures and this confirms a buy. If there is Backwardation while getting a sell signal then the entry is not confirmed. The confirmation was not applied to the hypothetical buys / sells in this chart but it is something to consider. This post has been marked as Neutral despite getting a confirmed buy signal. That is because I simply cannot stomach buying after a prolonged markup in the price. I strongly prefer to let the market come to me and therefore am waiting to see what happens when we eventually do correct, even if that means paying a higher price. Nevertheless I thought that this is a great indicator that is very important right now. I have been expecting a correction for weeks, but now I see that there is plenty of gas left in the tank for another leg up, despite being overbought at a major level of resistance.
BITSTAMP:BTCUSD
by Sawcruhteez
5