In a historic move, Bitcoin surpassed the $45,000 mark for the first time since April 2022, causing ripples in the perpetual futures market. Matrixport, a leading crypto services provider, reported that the global average perpetual funding rates soared to an all-time high of 66% annually during Asian trading hours.
Perpetual contracts, a type of futures contract without a fixed expiry date, use a funding rate mechanism to align their prices with the current market value of the underlying cryptocurrency. Positive funding rates indicate that perpetual contracts are trading at a premium compared to the spot price.
In simpler terms, those in long positions incur a cost and pay short position holders to maintain their open positions. Exchanges collect funding rates every eight hours, reflecting ongoing market dynamics.
Markus Thielen, Head of Research and Strategy at Matrixport and Founder of 10x Research, highlighted the significance of this scenario, noting that a funding rate peaking at 66% means long position holders are paying a hefty annual rate to stay long.
An interesting observation was the continual rise in funding rates during the year-end holiday season, suggesting a consistent bullish sentiment among crypto traders. Thielen speculated that this optimism might be linked to expectations of an imminent approval of a Bitcoin exchange-traded fund (ETF).
While high funding rates reflect a bullish mood, they can become challenging for long positions when the market reaches saturation, potentially leading to a price pullback. As Bitcoin continues to trade above $45,000, the market will closely monitor how long positions manage this situation.
Bitcoin maintains its position above $45,000 without showing signs of significant uptrend fatigue. The cryptocurrency experienced a notable rise of over 56% in the last quarter of 2023. Market participants are anticipating the approval of one or more spot-based Bitcoin ETFs by the SEC, which could be announced as early as Tuesday, according to Reuters.