Definition ∞ Funding Rates Low refers to a market condition in perpetual futures contracts where the periodic payments between long and short positions are minimal or negative. Low funding rates suggest a reduced appetite for leverage among traders. They can indicate a neutral or bearish sentiment in the derivatives market. This situation often points to a lack of strong directional conviction.
Context ∞ Low funding rates are a key indicator for analyzing sentiment in the cryptocurrency derivatives market, frequently reported in financial news. A sustained period of low or negative funding rates may precede a short squeeze or a shift in market momentum. Traders and analysts monitor these rates to gauge speculative activity and potential market reversals.
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