funding rate
To understand the Funding Rate, it is important to know that a huge percentage of Bitcoin trades are made on the Futures Market. Therefore, the sentiment of Futures Market investors ends up being very relevant and impactful on the final price behavior of Bitcoin.
The Bitcoin Funding Rate is a financing rate that traders pay or receive when trading Bitcoin futures contracts. If the funding rate is positive, traders who are buying pay this funding rate to traders who are selling. If the funding rate is negative, traders who are selling pay to those who are buying.
During Bitcoin price rallies, the funding rate tends to be positive as there are more traders buying than selling futures contracts. This can indicate more optimism in the market regarding the future price of Bitcoin. In price declines, the funding rate tends to be negative, indicating that there are more traders selling than buying, which can signal a more pessimistic sentiment regarding the future price of Bitcoin.
Cool Charts to use it combined: Days Since ATH, After Halving Comparison
Read our Article: How to Profit with Funding Rate