Arthur Hayes, a prominent figure in the cryptocurrency world, recently took to Twitter to seek explanations regarding a puzzling market trend. Despite an almost 100% pump in Bitcoin (BTC) following the FTX trading platform's impact, perpetual funding rates have remained negative. Hayes asked his followers, "Any theories as to why after an almost 100% pump in BTC post FTX, perp funding is still negative?"
In order to comprehend the significance of Hayes' question, it is essential to have a clear understanding of perpetual funding. Perpetual funding serves as a tool used by crypto derivatives exchanges to maintain the alignment of perpetual futures contracts' prices with the spot price of the underlying asset. If the funding rate turns positive, holders of long contracts compensate those holding short contracts, while in the case of a negative funding rate, the short contract holders pay the long contract holders.
The negative perpetual funding rate observed by Hayes signifies that the market is predominantly bearish, even though Bitcoin's price has nearly doubled since the FTX event. This situation raises questions about the source of the marginal sell pressure that is countering the bullish momentum.
Several factors could be contributing to this phenomenon. One possibility is that short-term traders are taking advantage of the price spike to sell their positions, creating a temporary imbalance between buyers and sellers. This selling pressure might be temporary, and as more investors enter the market, the funding rate could return to positive territory.
At the time of writing, Bitcoin is trading above $30,000, specifically at $30,213, with a 9% price increase in the last 24 hours. The Ethereum unlock went smoothly, with no significant selling pressure observed. However, over 50,000 ETH is yet to be unlocked in the foreseeable future, with 16 unlocks scheduled per block.