Rising Bitcoin futures funding rate signals traders expect $50,000 BTC

[trendcoin]

Bitcoin perpetual futures buyers are paying a 5.4% weekly funding rate to keep their positions open, but is this sustainable?

Today Bitcoin (BTC) price rallied to a new all-time high at $44,900 shortly after Tesla announced a $1.5 billion investment. This event triggered $555 million worth of shorts to be liquidated in two hours and it happened as Bitcoin futures open interest reached $13.7 billion, which is just 3% below its historical high.

These price moves drastically increased the cost of carrying long positions, mainly for those using perpetual futures. This indicator raised a yellow flag on how leveraged those investors are and their potential price impact.

As shown adove, the aggregate BTC futures open interest just reached a $15 billion all-time high.

Whenever unexpected positive news hits the market, it is natural for players to enter extreme leverage positions. This happens both for the short sellers, whose margins diminish due to losses, and the long buyers who tend to increase their positions.

Shorts with insufficient margin get liquidated as their positions are forcefully terminated and their leveraged decreases. On the other hand, the longs are profiting, thus increasing the position doesn't increase their leverage as much.

After the initial pump it’s expected that the funding rate increases and the fees paid by longs to keep their perpetual futures (inverse swaps) open rises.

source: https://cointelegraph.com/news/rising-bitcoin-futures-funding-rate-signals-traders-expect-50-000-btc