$HIVE 1. The dealer's potential to use the funding mechanism
The essence of funding rate settlement
The funding rate is a mechanism to balance the ratio of long and short positions: When the funding rate is negative, shorts need to pay fees to longs.
Conversely, when the funding rate is positive, longs need to pay fees to shorts.
The settlement period is usually every 8 hours, but this one is 4 hours, indicating that the fees themselves are significant, and the dealer can manipulate prices for profit using the settlement period.
How the dealer manipulates funding rates
Raising prices, increasing enthusiasm for longs:
Before the countdown of the settlement period, the dealer may quickly raise prices through large buy orders.
Rising prices attract more retail investors to go long, creating a false impression of 'high bullish sentiment' in the market.
Eating into the funding rates of shorts:
In the case of negative fees, shorts need to pay high funding rates to longs.
If the dealer controls a large number of long positions, they can directly profit from the funding fees paid by shorts.
Attracting retail to chase high before settlement:
While raising prices, use market sentiment to attract more retail investors to chase high and open long positions.
The dealer sells at high positions, reducing long positions, preparing for the next downward operation.
Rapidly lowering prices after settlement:
After the funding rate settlement, the dealer sells short, gaining profits from two aspects: firstly, directly profiting from price declines (short positions are profitable).
Secondly, it pressures retail long positions chasing high (liquidation or stop-loss), further lowering prices.
2. Current market behavior matches the dealer's strategy
Combined with the information you provided (increased long positions, rising prices, negative funding rate), the following phenomena highly match the dealer's manipulation strategy:
Phenomenon 1: Significant increase in long positions and rising prices
Possible manipulation strategy: The dealer creates an upward trend by pushing prices up, attracting retail longs to enter.
The goal is to have retail investors take over and increase short positions at high levels.
Phenomenon 2: Funding rates are negative and gradually expanding
Possible manipulation strategy: The dealer holds a large long position, using negative fees to earn payments from shorts.
In this case, retail shorts are often forced to pay higher funding rates due to the prices pushed up by the dealer.
Phenomenon 3: Prices may rapidly decline after the fee settlement
Possible manipulation strategy: After the funding rate settlement is completed, the dealer sells short to lower prices.
Retail long positions attracted by the dealer are forced to stop-loss or face liquidation when prices drop, further pushing prices down, allowing the dealer to profit from shorts.
3. Why is this strategy favorable to the dealer?
Two-way profit:
When rising: Attract long funds by raising prices while eating up short fees.
When falling: Directly profiting from shorts by suppressing prices while forcing longs to liquidate.
Attracting retail counterparties:
The dealer uses market sentiment (such as a sudden price surge) to attract retail investors to chase long at highs, then operates in the opposite direction to harvest.
The leverage effect of funding rates:
The existence of negative fees provides the dealer with additional income; regardless of market volatility, as long as they maintain long positions until the settlement point, they can earn the fees paid by shorts 'risk-free'.