Why are the contract price and spot price in the cryptocurrency market always synchronized?

It can be said that they are synchronized (they rise and fall together), but they are not always the same. When the price fluctuates normally, there will generally be a difference of three or five dollars between the two. (There are deviations in most cases)

This requires two situations. The first is the contract premium (that is, the contract price is higher than the spot price); the second is called discount (the contract price is lower than the spot price). Although there is a funding rate, it cannot make the contract and spot prices exactly the same because these are two markets in themselves. The role of the funding rate is to make the contract price anchored to the spot price as much as possible, and there will be no significant deviation in the long run.

Simply explain the logic of the funding rate and how to achieve it to anchor the spot price as much as possible: Taking Bitcoin as an example, the funding rate range is between 0.375% and -0.375%, that is, there are only two possibilities (positive and negative). In most cases, the funding rate is positive. At this time, the contract is in a premium state, which means that most funds/or most people are holding long positions. The higher the rate, the more long positions are held, and the higher the contract premium. Because the funding fee is charged every eight hours, most people cannot hold warehouse receipts for a long time. Some people will choose to sell (those who are unwilling to pay the funding fee will also choose to sell before the funding fee is charged). This will make the selling volume greater than the buying volume in a short period of time, causing the price to fall back to a reasonable range (close to the spot price range).

Another case is a negative funding rate, when the contract price is in a discount state. However, retail trading alone will not cause the contract price to be in a discount state, because the amount of retail funds is too small. Generally, this situation is affected by external factors, resulting in panic. Most people are short in a short period of time, and the market makers are manipulating and suppressing prices quickly. In this case, it is very simple to judge whether there are market makers using external factors to participate in the operation. It depends on how long this state lasts. The longer the duration means the higher the cost of operation, so whether the price rises or falls rapidly, it will enter the consolidation stage.

As for why the contract price has been in a premium state for a long time, I personally believe that from a macroeconomic perspective, this is a market that is constantly increasing (this is a fact). Whether it is the so-called value investment or ordinary small-cycle trading, it is all about expectations for the market, and most people's expectations are optimistic.

If you don’t know how to operate and are still confused, please go to Ye Jincun #ENA #BOME #WIF $SOL $DOGE