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Assignment - Funding Rates

Funding rates are periodic payments between traders that help align perpetual futures contract prices with the underlying asset's index price. They reflect trader sentiment, with negative rates indicating a bearish outlook and positive rates suggesting a bullish perspective. Additionally, funding rates can signal potential market reversals based on the balance of long and short positions.

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42 views2 pages

Assignment - Funding Rates

Funding rates are periodic payments between traders that help align perpetual futures contract prices with the underlying asset's index price. They reflect trader sentiment, with negative rates indicating a bearish outlook and positive rates suggesting a bullish perspective. Additionally, funding rates can signal potential market reversals based on the balance of long and short positions.

Uploaded by

v.k.patil242.vp
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

ASSIGNMENT

Topic :- Funding Rates

The Funding rates are periodic payments between traders to make the perpetual
futures contract price close to the index price, or the underlying crypto constituting the
futures contract. A perpetual futures contract is an agreement to buy or sell an asset at
a predetermined price without an expiration date on the contract.

In simple words, funding rates are designed to show the overall sentiment of the
traders and how they view future market conditions. When funding rates remain
negative, it indicates how traders are short, or expect the market to go down. When
funding rates are positive, it implies how traders are long, or expect the market to go up
in the long run.

Funding rates helps us in identifying were long positions are more or short
positions are more opened in market as well as who is going to pay fee to whome.

Funding rates helps in predicting reversal in the market. such as when funding
rates are positive which means more and more long orders are opening in the market,
so to liquidate price can go short here. Similarly, when Funding Rates are negative it
indicates more & more short positions are opening in market & indicate that it can be
reversed. Following is how we can interprete Funding rates data :

 who is gonna pay whome ?

Funding Rate Indication Who Pays

Red (+ve) More Long Long pays short

Green (-ve) More short Short pays long

 Funding Rate & price movement relation

Price movement Funding rate Future move

Price falls Positive Bearish

Price rises Negative Bullish

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