Sky-High Crypto Funding Rates Fuel Speculation Frenzy Before $420 Million Liquidation Selloff
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Funding rates on crypto futures spiked as traders paid high fees to remain in long positions during market euphoria. This led to open interest surging over $35B.
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High funding rates meant speculators paid up to 0.5% every 8 hours, or 50 cents per $100 position, to stay long.
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High funding rates incentivized shorts and likely contributed to Tuesday's BTC drop as traders took profits after a week-long rise.
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The BTC drop liquidated $300M in bullish bets, with BTC traders losing $120M as prices fell 4%. ETH traders lost $63M.
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With the market drop, funding rates have normalized around 0.01% on most exchanges as of Wednesday morning.