- Bitcoin perpetual swaps funding charges have rallied to multi-year highs on Binance and Bybit.
- The Crypto Concern & Greed Index confirmed that the market is in a state of maximum greed.
Bitcoin [BTC] borrowing prices on main cryptocurrency exchanges like Binance and Bybit have reached their highest level since 2021, IntoTheBlock famous in a recent post on X (previously Twitter). This means a surge in leveraged buying and selling.
In keeping with the on-chain knowledge supplier, on 14th March, BTC perpetual swaps funding charges on Binance and Bybit recorded highs of 0.06% and 0.09%, respectively.
Excessive Leverage equals excessive funding charges
Perpetual swaps are a sort of by-product contract that permits merchants to take a position on the worth of an asset with out truly proudly owning it.
The funding charge is a payment exchanged between merchants to make sure that the worth of the perpetual contract stays near the spot value of the underlying asset.
When an asset’s funding charges surge, as on this case with BTC, it means that there’s an unusually excessive demand for lengthy positions in comparison with quick positions. This means that extra merchants are betting on the worth of BTC growing than these betting on it lowering.
Though this generally signifies the presence of serious bullish sentiment available in the market, the quantity of trades executed utilizing excessive leverage additionally implies that the market is overheating.
Excessive-leverage buying and selling typically displays market sentiment. If merchants are extremely bullish and are utilizing leverage to open lengthy positions, this sentiment can drive up the funding charges.
How a lot are 1,10,100 BTCs worth at the moment?
Nevertheless, an unabated rally in BTC’s funding charges poses sure dangers. As per the findings shared by a pseudonymous CryptoQuant analyst in a report dated sixth March, the analyst emphasised the results of a surge within the funding charges of an asset.
“Nevertheless, whereas rising funding charges sometimes accompany a bullish market sentiment, excessively excessive values will be harmful. Elevated charges improve the danger of lengthy liquidation cascades, which can end in heightened market volatility and sudden corrective actions.”
Furthermore, this surge in funding charges comes at a time when the market is overly “grasping.” As of this writing, the Crypto Fear & Greed Index is 81, indicating that the market remained in a state of maximum greed.
A market pushed by excessive greed is commonly vulnerable to sudden reversals, as sentiments can shift shortly. Destructive information or a change in market dynamics may set off a sell-off as buyers rush to chop their losses, resulting in a market correction.
At press time, BTC exchanged fingers at $69,000, per CoinMarketCap’s knowledge.
