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Hello everyone, I am NAT, let’s continue chatting!
2. Open Interest / Position / Open Contract Amount, Open Interest (OI) represents the "total number" of open contracts
: Refers to the open interest held by market participants within a certain period!
/
OI is an equal amount of long and short → it means that when you open a 1 BTC long contract, there must be a reverse trader who opens a 1 BTC short contract~
Purely looking at the relationship between price and OI (without considering other factors) lazy bag:
Price increase + OI increase = long position opened
Price increase + OI decrease = short position closed
Price decrease + OI increase = short position opened
Price drop + OI drop = long positions closed
/
Interpretation is easy, but there are many points to consider when using it. Here are some simple examples:
Market participants are adding to positions, OI rises
Since, as mentioned above, OI is equal to long and short, what we should judge is which party is more aggressive at the moment? What was the result?
Ex:
When you observe an increase in OI/increase in funding rates → new longs enter the market, but the price goes sideways/down, high funding rates may lead to bearishness, because going long without changing profits and losses will consume margin, which means Someone may be absorbing these new buyers~
The market falls and the funding rate increases. The high funding rate may cause the price to fall further. Some people are using leverage to buy. If the price falls further, it may lead to cascade liquidation!
/
As shown in the attached picture, the price is trading sideways at a periodic bottom, the funding rate is rising, and OI is rising. The price has not risen significantly, and there is a slow downward trend, but OI is still rising, and finally the long positions are liquidated → OI sharply Fall, price rebound!
Thanks for watching, if you have any questions please send a private message on Twitter NAT_BLAVE 🫶🏻
Degen Dog welcomes everyone to join 👨🏻💻
2. Open Interest / Position / Open Contract Amount, Open Interest (OI) represents the "total number" of open contracts
: Refers to the open interest held by market participants within a certain period!
/
OI is an equal amount of long and short → it means that when you open a 1 BTC long contract, there must be a reverse trader who opens a 1 BTC short contract~
Purely looking at the relationship between price and OI (without considering other factors) lazy bag:
Price increase + OI increase = long position opened
Price increase + OI decrease = short position closed
Price decrease + OI increase = short position opened
Price drop + OI drop = long positions closed
/
Interpretation is easy, but there are many points to consider when using it. Here are some simple examples:
Market participants are adding to positions, OI rises
Since, as mentioned above, OI is equal to long and short, what we should judge is which party is more aggressive at the moment? What was the result?
Ex:
When you observe an increase in OI/increase in funding rates → new longs enter the market, but the price goes sideways/down, high funding rates may lead to bearishness, because going long without changing profits and losses will consume margin, which means Someone may be absorbing these new buyers~
The market falls and the funding rate increases. The high funding rate may cause the price to fall further. Some people are using leverage to buy. If the price falls further, it may lead to cascade liquidation!
/
As shown in the attached picture, the price is trading sideways at a periodic bottom, the funding rate is rising, and OI is rising. The price has not risen significantly, and there is a slow downward trend, but OI is still rising, and finally the long positions are liquidated → OI sharply Fall, price rebound!
Thanks for watching, if you have any questions please send a private message on Twitter NAT_BLAVE 🫶🏻
Degen Dog welcomes everyone to join 👨🏻💻
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#MyFirstFeedPost
Hello everyone, I am NAT, from Degen Dog, and currently working as an intern at Blave. In my first article, let’s talk about “Derivatives Data”!
1. Funding Rate/funding rate
Perpetual contract, perpetual = a futures contract with no expiration date!
If there is no expiration date, how can the contract stay consistent with the underlying price?
Answer: funding rate!
/
The function of the funding rate is to ensure that "the price is as close as possible to the spot price!"
When the funding rate is positive, longs pay interest to shorts~
When the funding rate is negative, shorts pay interest to longs~
Payment is generally made every eight hours!
/
Funding is positive = futures price is higher than spot = longs pay the rate!
Negative funding = futures price is lower than spot = short sellers pay rates!
The greater the difference between the futures price and the mark price, the higher/lower the funding rate~
This mechanism ensures that futures prices are as close as possible to spot prices!
When the price deviates from the spot price, the funding rate will increase, higher fees will be paid, and the cost of holding a position will be higher~
/
Example:
If the bulls are very aggressive and push the perpetual contract price well above the spot price
High funding rate = going long requires high holding costs
You can also take advantage of high fees for reverse short arbitrage = buy spot and sell futures
Large amounts of spot buying can also close the rate gap, but this is less common when most of the price increases are driven by futures! Vice versa~
Welcome to follow on Twitter: @NAT_BLAVE
(If you want to join Degen Dog, you can also send me a private message ✅
#BTC #ETH #degen
Hello everyone, I am NAT, from Degen Dog, and currently working as an intern at Blave. In my first article, let’s talk about “Derivatives Data”!
1. Funding Rate/funding rate
Perpetual contract, perpetual = a futures contract with no expiration date!
If there is no expiration date, how can the contract stay consistent with the underlying price?
Answer: funding rate!
/
The function of the funding rate is to ensure that "the price is as close as possible to the spot price!"
When the funding rate is positive, longs pay interest to shorts~
When the funding rate is negative, shorts pay interest to longs~
Payment is generally made every eight hours!
/
Funding is positive = futures price is higher than spot = longs pay the rate!
Negative funding = futures price is lower than spot = short sellers pay rates!
The greater the difference between the futures price and the mark price, the higher/lower the funding rate~
This mechanism ensures that futures prices are as close as possible to spot prices!
When the price deviates from the spot price, the funding rate will increase, higher fees will be paid, and the cost of holding a position will be higher~
/
Example:
If the bulls are very aggressive and push the perpetual contract price well above the spot price
High funding rate = going long requires high holding costs
You can also take advantage of high fees for reverse short arbitrage = buy spot and sell futures
Large amounts of spot buying can also close the rate gap, but this is less common when most of the price increases are driven by futures! Vice versa~
Welcome to follow on Twitter: @NAT_BLAVE
(If you want to join Degen Dog, you can also send me a private message ✅
#BTC #ETH #degen