A little about futures funding rates.
In futures markets, funding rates are used to keep the price of futures close to the price of the underlying asset. Here's how negative and positive funding rates work:
1. Positive funding rate
If the funding rate is positive, holders of long positions (longs) pay holders of short positions (shorts).
This typically indicates that the market is "bullish" (the price of the asset is rising), and demand for long positions is higher.
2. Negative funding rate
If the funding rate is negative, holders of short positions (shorts) pay holders of long positions (longs).
This indicates a "bearish" market (the price of the asset is falling), and demand for short positions is higher.
This mechanism encourages a balance between longs and shorts.
