The situation of a negative APR (Annual Percentage Rate) in long positions generally applies to financial instruments like derivatives or futures contracts. In this case, when investors take a long position (buy position), they may face additional payments like the funding rate. Some reasons for a negative APR in long positions could be:
1. Funding Rate and Negative APR: When the funding rate is negative, investors in long positions pay those in short positions. This means that long position holders will need to make payments to short position holders in proportion to the imbalance. So, investors opening long positions will face a negative APR as they make payments while holding their position.
2. Market Sentiment and Excessive Long Positions: If the market experiences a period where excessive long positions are being opened for a particular coin, this can result in long position holders making payments to short positions. This can cause an increase in supply and a decrease in demand, leading to falling prices, and in turn, investors may face a negative APR as they hold long positions.
3. Falling Market and Long Positions: In a falling market, long positions generally start to lose value. A negative APR can further complicate matters, as long position holders will need to pay to maintain their positions. As prices fall, investors may choose to close their long positions, but the funding rate can still create ongoing costs.
4. Supply-Demand Imbalance: If the supply of a coin exceeds demand, the funding rate can turn negative. This results in falling prices and increasing selling pressure. Long position holders will face higher payments, experiencing negative APR as the market becomes more favorable for short positions.
In summary, the most common cause of negative APR in long positions is when the funding rate turns negative due to an imbalance in the market, where short positions are more dominant. This situation leads to ongoing costs for long position holders, and if prices drop, it can cause them to incur losses.
