When is the Bitcoin funding rate high or low?

The Bitcoin funding rate is a mechanism in contract trading that is used to balance the power between longs and shorts in the market. Its high and low are related to the difference between long and short positions in the market, and are usually automatically adjusted by the exchange. In contract trading, if the long positions are larger relative to the short positions, the long positions need to pay funding fees to the short positions, and vice versa. For investors, how much is the Bitcoin funding rate? And how low is the Bitcoin funding rate? Very important, this will directly affect the net profit. Generally speaking, the maximum upper limit of Bitcoin funding rate is 0.375%, and the lowest limit is -0.375%. The editor below will tell you in detail.

What is the high Bitcoin funding rate?

Generally, when the Bitcoin funding rate exceeds 0.01% of the base rate, it is considered higher. High funding rates mean long positions pay higher funding fees to short positions. This shows strong demand for long positions relative to short positions, which could cause the price of the perpetual futures contract to be higher than the price of the underlying asset.

High funding rates may also reflect bullish market sentiment, with traders optimistic about future underlying asset prices. They are willing to pay higher funding rates to maintain long positions in anticipation that the price of the underlying asset will rise.

High funding rates can be a warning sign for traders. If funding rates remain high, perpetual futures contract prices may rise unsustainably, triggering market adjustments or even collapse.

How low is the Bitcoin funding rate?

Bitcoin funding rate below -0.08% is considered a low level, which means that the short power in the current market is relatively strong. When the mark price is lower than the index price, in order to make the mark price approach the index price, the short side (put) will pay the funding rate to the long side (call) to encourage more people to go long on the perpetual contract, thereby pushing up the index price. . In this case, the funding rate will be negative.

The funding rate is only calculated based on the funds you need to pay or receive for the long or short position in the transaction, excluding any handling fees paid to the exchange. It has nothing to do with leverage, but rather your position size.

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