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Fundingrate

Open Interest - Deciphering Bitcoin's Market SentimentIn the ever-evolving landscape of cryptocurrency trading, Bitcoin often serves as a beacon, reflecting broader market sentiment through its dynamic price movements and trading metrics. Today, let's explore the intricacies of Bitcoin's market dynamics by dissecting Open Interest (OI), funding rates, liquidations, and long/short ratios—using current data as our live case study. What do we see? (follow the steps) 1) Price action . Essential to understand it before the usage of any indicator. 2) Open Interest , the total number of outstanding derivative contracts like futures and options, provides a window into market activity. An increase in OI alongside a rising BTC price suggests new money might be entering, potentially signalling bullish sentiment. Conversely, decreasing OI during price drops might indicate a bearish outlook. Currently, we observe a slight uptick in OI as BTC recovers from a dip, hinting at growing confidence among traders. 3) The funding rate , specific to perpetual contracts, reflects periodic payments between longs and shorts. A positive rate, where longs pay shorts, suggests a bullish consensus, as it's costlier to maintain long positions. Presently, BTC's slightly positive funding rate aligns with its uptrend, indicating that traders might be anticipating further price increases. 4) Liquidations occur when a trader's position is closed by the exchange due to a margin call. A cluster of liquidations often follows a sharp price movement, as we've recently seen with BTC. These liquidation spikes could suggest that overleveraged positions have been flushed out, which can sometimes signal a local price bottom and a potential reversal point, paving the way for a more sustained upward trend. 5) The ratio of long to short positions tells us about the prevailing market bias. A ratio significantly above 50 indicates a bullish majority, which is currently the case with BTC. This higher long/short ratio could be interpreted as a market leaning towards optimism. As always, I hope you found this insightful and have a lovely Sunday! ;)
Education
by Lexi_Is_Trading
How to use futures funding in a trading strategy?Funding , also known as the funding rate, plays a crucial role in the dynamics of perpetual futures contracts. Its primary purpose is to maintain price parity between perpetual contracts and the underlying assets in the spot market. For instance, it ensures that the price of a BTCUSDT futures contract closely tracks the BTC spot price. Traders participate in funding by either paying or receiving the funding rate, which depends on the overall market conditions. In simpler terms, a trader can either incur the funding cost or earn from it. Some traders strategically use the funding mechanism to generate profits, not just from trading contracts but also from the funding rate itself. The necessity for funding arises to prevent significant disparities between perpetual futures contract prices and the actual assets. This mechanism helps smoothen price fluctuations in perpetual contracts, keeping them as close as possible to spot prices. It's important to note that funding is distinct from trading commissions, as funding rates are payments made by traders to other traders. On certain exchanges, funding comprises two components: a fixed percentage and a "premium" that adjusts based on the deviation between futures and spot prices. Typically, funding rates are calculated as a fraction of a percentage of the position size and depend on the magnitude of the deviations. Most exchanges settle funding payments every hour, four hours, or eight hours. Unlike trading commissions, which are charged for specific actions like opening or closing a position, funding rates accumulate continuously as long as the position remains open. Example When the funding rate is positive, it implies that long position holders pay short position holders. Conversely, when it's negative, short position holders pay long position holders. For example, if you hold a long perpetual contract at $5,000 and the funding rate is positive, you will pay a percentage of $5,000 (e.g., $0.76) to the trader holding a short position over a set period (e.g., 8 hours). Conversely, a negative funding rate suggests that the contract price has fallen below the spot price. To balance this, the exchange collects funding from short sellers and distributes it to long sellers. This encourages participants to avoid shorting and favor long positions, as the rate increases if the price continues to drop. In such situations, shorting becomes less profitable, prompting participants to close short positions, which, in turn, exerts upward pressure on the futures price to align with the spot price. The closer the futures price stays to the spot price, the lower the funding rates are. Thus, it's in the interest of traders to prevent deviations between contract and spot prices. The exchange continuously incentivizes traders to maintain this balance. In summary: Positive funding rate: Contract price > Spot price; long positions pay short positions. Negative funding rate: Contract price < Spot price; short positions pay long positions. The funding percentage accumulates as long as the position is open, and it can fluctuate between positive and negative based on market conditions. Each exchange may have its unique formula for calculating funding rates. For trading strategies, traders often compare funding rates with the prevailing market trend. The logic is simple: - Positive rate suggests the contract price is above the spot price, making short positions favorable. - Negative rate implies the contract price is below the spot price, making long positions attractive. If funding rates and the trend align, it can provide traders with an additional advantage. However, it's essential to regularly monitor funding rates to avoid unexpected losses when employing funding-based trading strategies. Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch! ✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes. --- • Look at my ideas about interesting altcoins in the related section down below ↓ • For more ideas please hit "Like" and "Follow"!
BITSTAMP:BTCUSDEducation
by Crypto4light
STRONG SHORT 🔴 Lenin Would Be Proud Of This Short STRONG SHORT 🔴 Lenin Would Be Proud Of This Short We were one of the first traders who called short (26 July) when BTC spiked above $40k, and everyone else was calling ATH, moon, and bull run. You asked me if the idea ("All-in BTC Short 🔻 TP: $31 700, x10") was still valid: Yes, it's still correct. So, this is a clean remake of the same idea to reinforce our position. 🔴 KEY POINTS: - RSI is strongly overbought - Momentum hit RSI Resistance - Price Action hit Historic Resistance - Machine Learning (Artificial Intelligence, Linear Regression ) says upcoming Resistance - Bitmex Funding Rates favor short positions - Bitmex Troll Box is overbought (90% long) - Bitfinex whales started to short - Okex Top Traders have more shorts than longs - Chart Pattern: This Technical Indicator Variation worked 100% in the past We've got BTC short. All-in.
BITSTAMP:BTCUSDShort
by Elysian_Mind
5
XRP finding support on the Hourly chartThrough all the stress inducing moves that xrp can provide, it looks like it may have been a fake out to the bottom and now support on the hourly. It would be nice to finally see this damn/cursed/bloody asset to move and catch up to its ATH from 2017 as has BTC. Especially with the BUY signal on the Hash Ribbons indicator... Cost to much grief, buyers remorse and loss of potential gains with other since '17 by holding this. Cash out on the next run if there is one, do not hodl this thing.
COINBASE:XRPUSD
by mhernik