Bitcoin bulls tend to celebrate when BTC’s funding rate is negative, but is it really a “generational buying opportunity?”
The demand for leveraged buyers using Bitcoin (BTC) perpetual futures has dropped to its lowest levels in over six months, a trend some analysts consider extremely bullish. However, the BTC futures funding rate, which measures the demand between longs (buyers) and shorts (sellers), is greatly influenced by past performance, as historical data indicates.
Let’s dig in to whether or not Bitcoin’s flat funding rate is a sign of a buying opportunity.
Bitcoin’s funding rate fee is implemented by exchanges to manage the use of leverage since every trade involving perpetual contracts requires a buyer and a seller of equal size. When buyers are more aggressive, the funding rate becomes positive, indicating that they are paying for the use of leverage. Essentially, one side compensates the other, ensuring the exchange does not hold exposure risk.