$RIVER The greatest conspiracy of the 21st century—Funding Fees

As the name suggests, perpetual contracts never have an expiration date and do not require delivery, so funding fees are needed to keep the spot and contract prices aligned. This concept is actually very genius.
When the contract price is lower than the calculated spot mark price, the funding rate is negative, with shorts paying longs, encouraging longs to open positions and shorts to reduce positions, thereby pushing the contract price higher and bringing the two prices closer together, and vice versa.
But the problem lies in the fact that the trading scale and liquidity of the spot market and the contract market are completely different. So as long as project teams or market makers hold large amounts of spot, the liquidity in the spot market becomes even more tight.
If previously the project team or market maker secretly accumulated large long positions in the contract market, this is easy to achieve—simply place continuous orders in the contract market and buy a little in the spot market. Then, with a small amount of funds, they can push up the spot market, causing the contract price to rise accordingly. The more they manipulate, the higher the control, and the greater the profit from the contracts.
After pushing the price onto the top gainers list, many shorts are attracted, and the spot price is still rising, creating a price gap. The funding rate begins to turn negative, but that’s not enough. The market manipulators directly push the funding rate to -2, maintaining it for a period, turning the funding rate into a one-hour cycle to continuously harvest shorts.
At this point, the biggest conspiracy unfolds. If shorts do not close their positions, the market manipulators can use the hourly funding fees to further push up the spot market. Shorts will only lose more and more, like boiling a frog slowly—eventually, they will be squeezed out. If shorts close their positions, it will only continue to push up the contract price, providing an opportunity for the manipulators to exit. Neither closing nor not closing is the right choice.
To attract shorts, project teams will constantly release various messages during this rally, such as a large amount of spot collateral being released, urging everyone to short. Or they might artificially create a large red upper shadow on the candlestick chart to lure right-side shorts into the market, leading to a tragedy.
For everyone’s health, stay away from projects with 1-hour funding rates and those without spot assets. $RIVER