Crypto traders say negative finance rates are signals to buy, but are they? By Cointelegraph


Crypto traders say negative funding rates are signals to buy, but are they?

Perpetual contracts, also known as reverse swaps, have a built-in rate that is typically billed every eight hours. This commission guarantees that there is no imbalance in the exchange risk.

Even if the open interests of buyers and sellers match at all times, the leverage may vary, and when buyers (long buyers) ask for more leverage, the finance rate turns positive. Thus, they are the ones who pay the fees to the sellers (shorts).

Current Bitmex BTC Futures Weekly Funding Rate. Source: TradingView
Bitmex BTC Futures Weekly Funding Rate in 2020. Source: TradingView
1-month Huobi term base rate. Source: bias

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