Ethereum perpetual futures contract funding rates have risen to their highest since the global liquidation event in August, when major cryptocurrencies such as Bitcoin and Ethereum fell more than 20% as stocks fell. Derivatives trader Gordon Grant warned that the crypto perpetual futures contract market remains vulnerable to similar over-leveraged position-driven sell-offs, which may be driven by a combination of technical and macroeconomic factors.
Coinglass data shows that the open interest funding rate for Ethereum contracts is currently 0.0116%, the highest level since July 29, when Ethereum was trading at $3,316, and its price plummeted 22% in early August. The sudden rate hike by the Bank of Japan caused the unwinding of the yen carry trade, triggering a global stock market crash, which largely triggered that crash. While the initial shock was exogenous in nature, Grant explained that the highly leveraged crypto linear derivatives futures market may have amplified the impact.
In an interview, Grant said that the cryptocurrency market would face vulnerability if another such exogenous shock occurred, similar to macro events such as the unwinding of the yen carry trade that triggered the liquidation event in early August.
He added that other factors are also influencing the market. For example, investors are wary of a potential pullback in Nvidia and other high-performing chip stocks, a slowdown in China's recent stock market rebound, and continued spread of tensions in the Middle East. He believes that these factors, combined with the existing leverage in the crypto market, could catalyze or exacerbate a sharp market downturn (even if short-lived), especially in options-driven liquidations. (The Block)