The Bitcoin freight train doesn't seem to be stopping. This makes it more expensive to maintain leveraged bullish bets on perpetual futures, creating attractive arbitrage opportunities for directionless traders.
Bitcoin (BTC) rose to nearly $57,000 early Tuesday, its highest since the end of 2021 and a year-to-date gain of 32%, according to data from CoinDesk. The broader market index, the CoinDesk 20 Index, rose nearly 6%.
The annualized funding rate for Bitcoin perpetual futures listed on Binance has exceeded 100% for the first time in at least a year, according to data sources Verodata and Coinglass. Bybit and Deribit's funding rates rose to 95% and 56%, respectively.
Perpetuals or futures with no expiration date use funding rates to synchronize the perpetual price with the spot price. A positive funding ratio indicates that perpetuals are trading at a premium to the spot price, and traders holding long or buy positions pay fees to traders holding short positions. is needed. The exchange collects funds every 8 hours.
In other words, a positive and rising funding rate indicates a bullish mood in the market, or a bullish bias in leverage.
Marcus Thielen, founder of 10X Research, said the rise in funding rates is likely a bullish bet by traders in anticipation of continued inflows into U.S.-based spot ETFs.
Markus Thielen, founder of 10X Research, who predicted that Bitcoin would rise to $57,000, said, “PERP funding rates have risen explosively, and open interest continues to rise, currently at $14.4 billion. “I'm doing it,” he said. “Traders are increasingly confident that halving and ETF inflows will be bullish.”
Thielen added that the sharp rise in funding rates means directionless traders and arbitrageurs stand to make attractive profits.
Arbitrage involves profiting from the price difference between two markets. Rising funding rates mean that perpetual bonds are trading at a significant premium to spot prices. Therefore, arbitrageurs can buy cryptocurrencies on the spot market by shorting perpetual futures and earn a premium while avoiding price volatility risk.
“Rising perpetual futures funding rates are allowing crypto hedge funds to deliver very high ARB spreads. BTC and ETH are trading at 20% and 30% or even higher, which is the sweet spot for ARB books. Everybody wins in this market, whether you're outright long or doing a purp spread. It's a great time to be in crypto!'' Thielen told CoinDesk.
