Rising Costs in the Perpetual Futures Market

Bitcoin enthusiasts looking to hold long positions or leveraged bullish bets in the perpetual futures market are facing record-high costs. As bitcoin surges beyond $45,000 for the first time since April 2022, global average perpetual funding rates hit an all-time high of 66% annualised during Asian trading hours, according to data from Matrixport.

Understanding Perpetuals and Funding Rates

Perpetuals, a type of futures contract with no expiry date, utilise the funding rate mechanism to align their prices with the current market value of the cryptocurrency. Positive funding rates indicate that perpetuals are trading at a premium to the spot price, with long positions paying shorts to maintain their open positions. Negative rates imply the opposite. Exchanges calculate funding rates every eight hours.

Insight from Market Experts

Markus Thielen, Matrixport's Head of Research and Strategy, and 10x Research's Founder, highlighted the significance of the current funding rate, stating, "This morning, the funding rate is reaching a new high at +66%. This means longs pay shorts 66% per year to stay long." The chart reflects a sustained elevation in funding rates, even during the year-end holiday season, signaling a prevailing bullish sentiment in the market.

Bullish Mood Persists Despite Holiday Season

Contrary to expectations of a slowdown during the holiday period, the Bitcoin funding rate has maintained its heightened levels. Thielen suggests that this phenomenon indicates sustained bullishness among crypto traders who anticipate the imminent approval of a Bitcoin ETF.

Navigating the Current Bullish Wave

As Bitcoin's funding rates soar to unprecedented levels, the crypto market remains ablaze with optimism. Traders, undeterred by holiday festivities, continue to exhibit a strong belief in the cryptocurrency's potential. The sustained elevation in funding rates reflects not just a temporary surge but a robust bullish sentiment, possibly fueled by anticipations of regulatory developments, such as the much-anticipated approval of a Bitcoin ETF. As the market navigates these uncharted waters, it becomes crucial for investors to stay vigilant and adapt to the evolving dynamics, considering the potential impact on trading strategies in the coming weeks.