How do market makers sell their products by shorting contracts? !

Let me tell you about it today!

The newly listed Binance $DOGS also has this kind of ups and downs trend. I will take DOGS as an example to explain it.

The contract trading volume of DOGS on Binance in the past 24 hours was $580 million, while the spot trading volume was $110 million. The liquidity of the contract is more than 5 times that of the spot, which shows how good the contract liquidity of the copycat is. DOGS was launched on August 26, and the highest price reached 0.0018. It fluctuated downward for the next two days. It rose 35% in two hours from 4 to 5 pm on the 28th. It then remained at the high point for less than five hours from 6 to 11 pm and began to plummet at 12 o'clock. The current low has fallen 32% from the high point. What happened on the 28th? You can see it at a glance by looking at the funding rate and open interest of coinglass.

At 12:00 on the 28th, the funding rate suddenly rose to 0.0385% (usually 0.01%), but you will find that in the next funding period, that is, at 8:00 on the 29th, the funding rate was instantly smashed to 0.0087%, while the open interest here hit a new high of 150 million US dollars. So what happened? After the 35% increase between 4 and 5 o'clock on the 28th, retail investors began to chase highs, pushing the long funding rate of the contract to 0.0385%. At 12 o'clock, the market maker saw that the car was almost full, so he opened a short order, and the time for opening the first batch of short orders was from 12 o'clock on the 28th to 8 o'clock the next day (the hell time when domestic retail investors were sleeping), and then there was a continuous spot market crash at highs, and short positions were built at highs in the contract. You ask me if the dogs have finished smashing? Let's go back to the funding rate and open interest. The funding rate has fallen to 0.0023%, and the currency price has fallen by 35%, but the open interest is still 123 million. Why? Because not only did the market makers not close their short positions, they also kept adding short orders at every rally high, and the spot goods were also being shipped out slowly.

So how do you know that the market maker has sold all his stocks? There are two leading indicators. One is that the open interest has decreased, and the other is that the funding rate has returned to normal. This probably means that the market maker has closed his short position. But when to pull the market up depends entirely on the market maker's interpretation of the market. There are too many factors, so I won't go into them here.

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