Why is everyone frantically shorting contracts while spot prices keep rising? The truth is too brutal to believe!
Recently, many brothers have asked me: with so many short positions in the market, why are prices still soaring? Today, I will explain the underlying logic of how the dealers operate in the most straightforward language.
First, you must understand: Contracts are not spot!
Opening a short position does not mean you are actually selling off your chips to crash the market. Contracts are a gambling game, and a short position can only exist if someone takes the long position. When you open a short, it’s just a game between longs and shorts, and it has no direct relation to spot trading.
What really determines the market trend is only spot transactions. When spot is being bought up frantically, contracts will naturally follow; when spot can no longer hold, only then will contracts collapse in sync. The essence of contracts is that they are shadows; the spot is the substance.
Now the question arises: Why do some altcoins have funding rates that are negative to the extreme (-1%, -2%), yet contract prices are still rising? The answer is brutal—spot is firmly held in the hands of the dealers! They are not selling at all but are continuously buying. As long as the spot does not flow out, no matter how many shorts you open, you cannot shake the market. Negative funding rates can only indicate one fact: the dealer is controlling the market using spot.
Let’s take a simple and straightforward example: a coin issues 1000 units, and the dealer holds 990 units. If they want to pump the price, they just need to place an order with one hand and buy it back with the other, essentially trading with themselves, and the price can be pushed up step by step. The real selling pressure is only a mere 10 units; the retail traders' small chips are simply not enough to make a difference.
This also explains a detail: why do some coins only have contracts and not spot trading? Because the spot is completely monopolized by the dealers, allowing them to manipulate the market as they please, playing retail traders like puppets.
So, stop fantasizing that short positions can crash the market. Opening a short ≠ crashing the market; contracts ≠ power. The true king is the spot.
When the spot is in the hands of the dealers, no matter how many shorts you open, in the end, you will only become their ATM.
Finally, I wish every person who likes, saves, and follows this article to reap great rewards in this bull market!
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