Holding long positions or leveraged bullish bets in the perpetual futures market tied to Bitcoin became more costly than ever early Monday as Bitcoin surpassed $45,000 for the first time since April 2022.
Data collected by crypto service provider Matrixport shows that global average perpetual funding rates rose to a record 66% annually during Asian trading hours.
Perpetuals are futures with no expiration date that use the funding rate mechanism to keep perpetual prices in sync with the current market price of the cryptocurrency. Positive funding rates mean that perpetual bonds trade at a premium to the spot price and longs pay shorts to keep their positions open. Negative interest rates suggest the opposite. The exchanges charge funding rates every eight hours.
“This morning the funding rate hits a new high of +66%. This means long positions pay short positions 66% per year to stay long,” said Markus Thielen, head of research and strategy at Matrixport and founder of 10x Research.
The chart shows that the funding rate remained elevated during the year-end holiday season, indicating bullish sentiment in the market.
“Surprisingly, the Bitcoin funding rate remained elevated throughout the holidays, suggesting that crypto traders remained very bullish and expect a Bitcoin ETF approval soon,” Thielen noted.
Note that extremely high funding rates often become a drag on long positions when the market stops moving higher, causing bullish bets to be abandoned and the price to decline.
At the time of writing, Bitcoin shows no signs of bullish exhaustion as prices hold above $45,000. The cryptocurrency surged over 56% in the final quarter of 2023 as speculation gripped the market that the US Securities and Exchange Commission would approve one or more spot-based BTC exchange-traded funds (ETF). According to Portal, the decision could come as early as Tuesday.