According to the latest data from Coinglass cited by BlockBeats, the funding rate on major centralized and decentralized exchanges has started to lean towards a bearish trend. Detailed data shows that key cryptocurrencies are all recording a decreasing funding rate, reflecting a change in trader sentiment.
What is the funding rate?
This is a mechanism designed to keep perpetual contract prices closely aligned with the spot price of the underlying asset. This system operates by distributing fees (or receiving them) between those who open long and short positions – without going through any underlying fees. The goal is to balance the holding costs of contracts and maintain stability between the derivatives market and the spot market.
A funding rate of 0.01% is often considered neutral.
• When the funding rate exceeds 0.01%, the market shows a bullish sentiment, indicating more long positions.
• Conversely, when the funding rate falls below 0.005%, this reflects a bearish sentiment, as many investors lean towards short positions.
With the widespread decrease in the funding rate as it currently stands, this could be the first signal of a deeper correction in the market. Investors need to closely monitor fluctuations and combine additional technical factors to make appropriate decisions.
