Annual funding rate for perpetual Bitcoin futures reaches 100%

Funding rates on perpetual Bitcoin futures contracts hit a new annual record, creating favorable conditions for cryptocurrency hedge funds.

According to the portal of analytical information about the crypto market Velo Data, the annual futures rate on the largest exchange Binance exceeded 100% for the first time in a year.. Similar funding rates on the Bybit and Deribit exchanges rose to 95% and 56%, showing significant growth for the first time since March 2023.

10X Research founder Markus Thielen believes rising funding rates are due to the fact that crypto traders are mentally prepared to go higher as liquidity continues to flow into US spot ETFs.

This has caused the cost of holding bullish leveraged bets in perpetual futures to skyrocket, creating an attractive arbitrage opportunity for all crypto market traders.

As a reminder, perpetual futures funding rates, or funding, are fees that crypto exchanges charge to maintain market prices for perpetual cryptocurrency contracts that do not have a specific maturity date.. This fee helps redistribute liquidity between long traders and short traders to keep contracts attractive and relevant.

When the contract price begins to differ significantly from the actual price of the cryptocurrency, exchanges change the amount of this fee. Goal: to motivate traders to act in such a way that the contract price again becomes equal to the real price of the crypto asset. If the market goes up, usually those who bet on the increase pay those who bet on the fall.. And if the market goes down, then vice versa. The funding system of cryptocurrency exchanges automatically debits funds from some traders and credits them to others.

Now, on Tuesday afternoon, February 27, Bitcoin is trading at levels of $56,180 – $57,236

Over the past 24 hours, the market value of BTC has increased by 10.7%. On the weekly timeframe the growth was about 9%.

The day before, JPMorgan Chase senior analyst Nikolaos Panigirtzoglou noted that the interest of retail investors in cryptocurrencies is once again being revived, and the upcoming Bitcoin halving is already having an impact on the market value.