Virtual Asset Market in 'Wait-and-See Mode'… Slight Drop in Futures Funding Rate

While the virtual asset (cryptocurrency) market has recently shown a wait-and-see attitude, analysts say that the downward trend in the funding rate in the futures market has slightly expanded bearish sentiment.

On the 28th (local time), Crypto-focused media CoinTrackDaily quoted data analytics platform CoinGlass, reporting that “the funding rate is declining on both centralized and decentralized exchanges, reflecting investors’ conservative sentiment.”

According to the outlet, the funding rate of major cryptocurrencies such as Bitcoin has recently dropped below 0.005%, indicating that more investors are expecting a downturn. This suggests that investors anticipating a short-term dip are favoring sell positions.

Meanwhile, the 'Crypto Fear & Greed Index', which reflects market sentiment, is currently at 49, remaining in the 'neutral' range. While there is no extreme fear or optimism, the market continues to stay cautious without a clear direction.

For reference, the funding rate is a mechanism in perpetual futures trading to prevent the market price from diverging from the underlying asset’s actual value. Exchanges maintain price equilibrium by adjusting fees between long (buy) and short (sell) positions, and the rate applied here is the funding rate.

For example, if there is an influx of buyers, those holding long positions pay a fee to those with short positions. Conversely, if there are more sellers, those with short positions pay the fee. Through this, the price of futures contracts is encouraged to stay close to the spot coin price.

Generally, a funding rate around 0.01% is interpreted as reflecting market equilibrium, whereas a lower rate suggests that market participants are seeing an increased likelihood of a short-term downturn.