Perpetual Futures Funding involves regular payments exchanged between long and short position holders in a perpetual futures contract. This mechanism aims to keep the contract’s price closely aligned with that of the underlying spot asset. It serves to prevent sustained price divergences.
Context
Perpetual futures funding rates are a closely observed metric in cryptocurrency markets, often reported in news to assess speculative sentiment. Positive funding indicates long positions compensate short positions, suggesting bullish sentiment. Conversely, negative rates signal bearishness, providing a real-time indicator of market positioning and potential price pressures.
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