In this post:
- According to IntoTheBlock, funding fees for perpetual swaps have increased to more than 10% on major exchanges and up to 20% on others.
- Even while the funding rates are lower than they were at the peak of Q1, on-chain data still suggests that speculative markets may be riskier.
- The CEO of CryptoQuant claimed earlier this month that the BTC-USDT markets were overly leveraged at roughly 270%.
Funding fees for perpetual swaps have increased dramatically on exchanges, rising above 10%, with large exchanges reporting increases of up to 20%, according to IntoTheBlock. However, compared to the peak rates of over 60% in the first quarter of this year, the current funding rate is significantly lower.
The recent rise in funding costs, according to IntoTheBlock, may be a sign of speculative overheating. Even though the current fees are lower than they were at the start of the year, the firm clarified that it still had concerns.
An unsustainable, quick rise in bitcoin market values brought on by excessive speculation is known as “speculative heating.” Rapid price gains, elevated investor euphoria, extremely high trade volumes, and asset overleveraging are a few signs of speculative heating.
In addition to rising finance costs, futures premiums have also increased on multiple exchanges, including Binance, Bybit, Deribit, and OKX. Per IntoTheBlock, perpetual swaps funding fees influence Futures premiums.
Vetle Lunde, the Head of Research at K33 Research, revealed the increasing futures premiums while talking to CNBC last week. Lunde mentioned that BTC and ETH premiums stood at 14%, double the percentage recorded before the U.S. presidential elections.
Ethereum funding rate hits an 8-month high
On November 12, the perpetual swaps funding rate for Ethereum hit an 8-month high, reaching about 6.1%. The coin has rallied about 40% since November 5, with bullish investors expecting a hit over $4,000.
According to reports, ShayanBTC, an analyst at CryptoQuant, cautioned against the possibility of Ethereum markets becoming overheated as a result of rapidly increasing funding rates. The rates may also suggest that Ethereum markets are overly leveraged, which might raise the possibility of pullbacks, the researcher said. Furthermore, ShayanBTC disclosed that traders may need new tactics to mitigate the common hazards in light of the present funding rates.
However, the company noted that since Ethereum futures are still rising, the high rates might be a sign of investors’ optimism. Particularly after ETH broke through the $3,000 barrier, ShayanBTC highlighted the apparent market confidence. As of this writing, the coin is trading at $3,302, having risen to almost $3,400 before correcting.
According to reports, the analyst mentioned the growing ETH funding rates at the end of September, suggesting a possible rebound.
The analyst supposedly said that the increase in buying activity by futures traders indicated a bullish outlook for the coin.
CryptoQuant CEO warns about BTC/USDT overleveraging
Additionally, the CEO of CryptoQuant noted that permanent funding rates were at a record high. Daniel Yan, the CEO of Kryptanium Capital, confirmed the rising funding rates, mentioning the rates for BTC perpetual funding, which had reached 0.05%. Yan expressed concern about the lack of equity rally amid the increasing funding rates.
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