Recently, the cryptocurrency market has witnessed a significant turnaround in the Funding Rate of TON (The Open Network), which has turned negative again. This movement indicates an increased interest in short positions among traders, reflecting a potential expectation of price decline.
What is Funding Rate?
The Funding Rate is a mechanism used in perpetual and futures contracts of cryptocurrencies to balance the market price with the contract price. When the Funding Rate is positive, traders in long positions pay traders in short positions, and vice versa when the Funding Rate is negative.
Impacts of Negative Funding Rate
A negative Funding Rate can have several repercussions in the market:
Incentive for Short Positions: The negative Funding Rate creates an incentive for traders to take short positions, anticipating a potential price drop. This can increase selling pressure in the market.
Increased Volatility: The expectation that more traders are positioned to profit from price declines can increase volatility in the underlying asset, in this case, TON.
Challenges for Long Positions: Traders in long positions may face additional costs or lower returns if the Funding Rate remains consistently negative, encouraging position adjustments or even liquidations.
Bybit and Impact on Funding Rate
Among exchanges, Bybit has been noted for contributing to an even more negative Funding Rate. This may be attributed to higher trading activity in derivatives or specific market dynamics on their platform.
Aggregated Funding Rate and Open Interest-Weighted Funding Rate
In addition to the individual TON Funding Rate, the Aggregated Funding Rate and Open Interest-Weighted Funding Rate are also negative. These metrics consider the behavior across all exchanges where TON is traded, indicating that the trend of interest in short positions extends widely across the market.
Written by joaowedson
