Have you ever wondered why, when you open your phone and look at the price of Bitcoin, your heart starts racing and your fingers itch to buy more? Congratulations — you are exactly the kind of lemming that the exchange whispers to: 'Come on, just a little more...'
And now pay attention! Let's talk about funding rates, those pitiful pennies you pay (or receive) for sitting in a long or short position, hoping to grab a piece of the pie.
Funding? What is that anyway?
Exchanges invented this trick to prevent the market from turning into a circus — more precisely, to keep futures from detaching from the real price.
And instead of pulling money out of thin air, exchanges decided to take it from you — you pay each other, like at an old drunken wedding: 'You give me — I give you, only this time someone stays sober and with money, and someone goes home on foot.'
If the funding rate is positive — it means greedy hamsters are rushing into longs so hard that steam is coming out of their ears. Long holders pay short sellers so that at least someone keeps the market on a leash.
If the rate is negative — everything is the opposite. People suddenly decide that Bitcoin is a scam, open shorts to the Pacific Ocean, and pay long holders for their resilience.
Bull market or cattle yard?
Funding rate above 0.01%? That means you are not alone. Thousands like you think Bitcoin is about to break through the ceiling.
And you know what? The exchange agrees with you. It is very glad that you continue to buy at the highs and pay for it.
Because guess who will be the first to go into the red when the big players dump the market? Right — the same 'bull' who 'understood everything'.
Rate below 0.005%? Everyone is shorting like crazy. Everyone has decided that 'Bitcoin will die'. And the market? Often does the opposite. Why? Because the market is a machine designed to milk the crowd.
Who profits?
Not you.
Those who profit are the ones sitting with a calculator and looking at these funding rates as a detector of foolishness. See overcrowded longs? They spin a short net. See that everyone is shorting? They pick up the bounce and squeeze those bears like an orange.
So what to do?
Here's the secret: if you opened a long or short just because 'everyone is doing it', close it. Put your phone down. Go do something useful.
If you can't — at least watch the funding rates. This is an honest barometer: if they scream 'everyone is longing' — think twice. If the rates are below the floor — prepare for a shot upwards.
Conclusion
Funding rates are not about numbers. They are about mass psychology. The exchange knows that the crowd usually makes mistakes. So don't be the crowd.
Look not where everyone is looking, but where they are making mistakes.
And remember — while some play casino with leverage, someone is earning on their commissions, liquidations, and — on those very funding rates.
