Is an ETF Truly Worth It? Bitcoin Bulls Pay Premium as Bitcoin Funding Rates Reach New Highs
Bitcoin has reached a new milestone, soaring past $45,700! The crypto community is ecstatic, but there’s a catch. Holding onto this skyrocketing price comes at a hefty price. Traders in the futures market are piling up bullish bets, and it’s becoming expensive to maintain their positions. So, is this a memorable party or a bubble waiting to burst? Let’s dive in and find out!
According to Matrixport’s data analysis, global average perpetual funding rates have reached an impressive 66% on an annualized basis, particularly during Asian trading. Perpetual futures, which don’t have expiry dates, adjust their prices using funding rates to reflect the current market value of the cryptocurrency.
These rising funding rates mean that perpetual futures are trading at a premium over spot prices. As a result, long position holders are paying short position holders to stay in the market. Markus Thielen, Matrixport’s head of Research and Strategy, commented on this recent increase in funding rates, stating that longs are willing to pay shorts to maintain their market stance.
Even during the holiday season, optimism remains high in the crypto community. Many are hopeful for the approval of a Bitcoin ETF. Thielen noted that the elevated funding rate during this period indicates that crypto traders are still very bullish and expect an ETF approval in the near future.
However, it’s crucial to exercise caution in a bullish market with high funding rates. In the past, extremely high funding rates have posed challenges for long-position holders when the market suddenly changes direction. This could lead to a shift in bullish positions and subsequent price adjustments.
Despite these potential risks, Bitcoin’s performance remains strong. With a price above $45,719, it has shown an impressive 56% surge in the last quarter of 2023. This momentum is potentially driven by expectations surrounding the approval of BTC exchange-traded funds by the U.S. Securities and Exchange Commission. This sets the stage for an exciting start to the new year.
Looking ahead, the crypto outlook for 2024 suggests that Bitcoin’s price will reach new all-time highs. Exciting times lie ahead for the crypto market!