Things you must know to avoid pitfalls!

Those situations with high funding fees are mostly due to large traders manipulating the market; at this time, you must not easily go short, or else you could easily be harvested.

Let’s first talk about how these traders operate. You need to understand that the price of the coin is ultimately determined by the spot market; contracts cannot directly influence the spot price. However, the spot market can affect the contract prices through funding rates, forcing the two to align as closely as possible.

Suppose this trader holds a large amount of spot; then they become powerful, able to shift prices with just a little money to raise the spot price. At this moment, the contract side also starts to stir, and the long positions begin to rise.

As the coin price rises, retail investors start getting anxious and rush to go short. As a result, you can see the contract positions rising sharply, and more and more people are going short. These short sellers are actually working against the trader.

At this point, the trader is clever; they will control the buying volume of the contracts or simply raise the spot price even higher, keeping the contract price just a little lower than the spot price. This way, their long positions can continuously earn the funding fees from the short sellers.

When the retail investors can no longer hold onto their short positions and they explode, the trader's long positions naturally get absorbed, right? Back and forth like this, the trader can earn a fortune, while those who went short can only consider themselves unlucky.

Therefore, when we engage in this, we must keep our eyes wide open and never be tricked by the trader!

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