{"id":84797,"date":"2023-11-15T08:18:24","date_gmt":"2023-11-15T13:18:24","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/crypto\/futures-funding-rates-normalize-after-crypto-surge-forced-traders-to-pay-high-fees-to-maintain-long-positions\/"},"modified":"2023-11-15T08:18:26","modified_gmt":"2023-11-15T13:18:26","slug":"futures-funding-rates-normalize-after-crypto-surge-forced-traders-to-pay-high-fees-to-maintain-long-positions","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=84797","title":{"rendered":"Futures Funding Rates Normalize After Crypto Surge Forced Traders to Pay High Fees to Maintain Long Positions"},"content":{"rendered":"<div>\n<figure id=\"attachment_131616\" aria-describedby=\"caption-attachment-131616\" style=\"width: 640px\" class=\"wp-caption aligncenter\"><noscript><\/noscript><figcaption id=\"caption-attachment-131616\" class=\"wp-caption-text\">Image Source: Pexels<\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">Funding rates on major token futures have started to return to normal levels after recent rally forced traders to pay unusually high fees to sustain their long positions.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Amid the recent surge in crypto prices, open interest in futures skyrocketed to over $35 billion, according to\u00a0<\/span><span data-preserver-spaces=\"true\">data by CoinGlass<\/span><span data-preserver-spaces=\"true\">.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The data shows a nearly 40% increase from the end of October, when open interest stood at $24 billion.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">With the leveraged positions piling up, funding levels reached some of the highest levels seen in recent months.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Funding rates are periodic payments made by traders based on the price difference between futures and spot markets.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">According to data, traders were paying fees ranging from 0.2% to 0.5% every eight hours on their borrowed funds to maintain their long positions, which translated to speculators paying up to 50 cents to exchanges for every $100 position held.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">However, some market observers warned of a potential market downturn as traders were increasingly incentivized to take short positions or bet against further price increases.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Such positions would earn fees from those who were going long. In futures trading, when funding is positive, longs pay shorts, and the opposite occurs when funding is negative.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">This situation likely contributed to the market drop witnessed on Tuesday, as traders took profits following a week-long upward trend, which led to nearly 90% of bullish bets being liquidated, totaling over $300 million.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Bitcoin (BTC) traders alone lost $120 million as prices declined by 4%.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Ethereum (ETH) traders faced losses of $63 million, while XRP and Solana\u2019s SOL-tracked futures witnessed over $30 million in cumulative liquidations.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Liquidation occurs when an exchange forcibly closes a trader\u2019s leveraged position due to a partial or total loss of the initial margin.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">It happens when a trader fails to meet the margin requirements to keep the trade open due to insufficient funds.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Large-scale liquidations can indicate a potential turning point in a sharp price movement.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Consequently, funding rates have now returned to normal levels, averaging around 0.01% on most exchanges as of Wednesday morning.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">CME Surpasses Binance as Leading Futures Exchange<\/span><\/h2>\n<p><span class=\"replacer\"><\/span><br \/><span data-preserver-spaces=\"true\">Last week, the regulated derivatives marketplace\u00a0<\/span><strong><span data-preserver-spaces=\"true\">Chicago Mercantile Exchange (CME)<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0dethroned\u00a0<\/span><strong><span data-preserver-spaces=\"true\">Binance<\/span><\/strong><span data-preserver-spaces=\"true\"> as the largest BTC<\/span><span data-preserver-spaces=\"true\">\u00a0futures exchange.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">CME now ranks first among futures and perpetual futures exchanges, boasting an open interest (OI) of approximately $3.85 billion, followed by Binance at $3.79 billion.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The reshuffling of rankings occurred amidst a major leverage flush out in the crypto market, driven by wild price swings.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The volatility resulted in a $2 billion drop in aggregate Bitcoin open interest, which previously stood at $12 billion.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Notably, the decline had a more pronounced impact on Binance traders compared to participants in the CME market.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Nevertheless, CME\u2019s gradual ascent to the top position throughout this year underscores the growing demand from institutional market participants seeking to trade the largest and most established cryptocurrency.<\/span><\/p>\n<div class=\"newsletter home-newsletter single\">\n<div class=\"left-side\">\n<p>\n        <em><br \/>\n            Enter your email for our Free Daily Newsletter        <\/em>\n    <\/p>\n<p> A quick 3min read about today&#8217;s crypto news!<\/p>\n<p>    <span class=\"response-msg\" id=\"newsletter-response\"><\/span>\n<\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>Read the full article <a href=\"https:\/\/cryptonews.com\/news\/futures-funding-rates-normalize-after-crypto-surge-forced-traders-to-pay-high-fees-to-maintain-long-positions.htm\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Image Source: Pexels Funding rates on major token futures have started to return to normal levels after recent rally forced traders to pay unusually high fees to sustain their long positions. Amid the recent surge in crypto prices, open interest in futures skyrocketed to over $35 billion, according to\u00a0data by CoinGlass.\u00a0 The data shows a [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":84798,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[243],"tags":[83],"class_list":["post-84797","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Futures Funding Rates Normalize After Crypto Surge Forced Traders to Pay High Fees to Maintain Long Positions | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Image Source: Pexels Funding rates on major token futures have started to return to normal levels after recent rally forced traders to pay unusually high\" \/>\n<meta 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