On-Chain Highlights
Definition: The average funding rate (percentage) set by the exchange for perpetual futures contracts. If this rate is positive, long positions will periodically pay short positions. Conversely, if this rate is negative, short positions will periodically pay long positions.
Ethereum perpetual futures funding rates have recently fallen from a bullish premium, a trend that is evident in both the short-term and long-term perspectives and reflects growing bearish sentiment among traders.
Historically, a negative funding rate indicates that short positions are benefiting long positions, suggesting that bearish bets are rampant. The chart shows that despite Ethereum price volatility since early 2024, funding rates have often been positive, signaling bullish expectations. However, the recent drop of both the funding rate and price below $2,700 highlights a shift in market sentiment.
Over the past few years, Ethereum's perpetual futures funding rate has shown wide fluctuations, closely mirroring broader market trends. During periods of strong market optimism, such as the 2021 bull run, the funding rate has spiked into positive territory, signaling that long positions prevail as traders bet on a continuation of price increases.
However, during market downturns, particularly in mid-2022 and at some points in 2023, the funding rate turned negative, reflecting a shift to bearish sentiment. These fluctuations highlight how the funding rate has historically acted as a barometer of trader sentiment and has often foreshadowed large price movements in the underlying asset.
The post Ethereum Funding Rate and Price Drops Suggest a Bearish Turn appeared first on CryptoSlate.
