A single chart to help you understand the funding rate logic. However, relying on the funding rate alone as a single indicator makes it difficult to precisely judge market conditions—you must combine it with the order book’s price and the positions’ OI to make a comprehensive assessment.

In arbitrage trading and the tussle between altcoin tokens, the funding rate has higher reference value. At the same time, don’t only look at whether the funding rate is positive or negative—the magnitude of the funding rate’s fluctuations is the key, directly reflecting the switch between “cold” and “warm” market sentiment.

Just as mentioned a couple of days ago, the BTC weighted funding rate has clearly declined. Even if it remains negative, it still shows that the bearish force continues to weaken, and the room and potential for large-scale short squeezes to play out afterward will be greatly compressed.

By the way, here’s a quick explanation of the positive funding rate arbitrage logic: buy the spot of the corresponding coin, and simultaneously open an equivalent contract short position. Under the premise that there is no significant risk to the principal, you can steadily and continuously earn the contract funding rate yield.

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