The funding rate has been positive for three straight days, which means longs in perpetual futures are paying shorts. I know this setup all too well—from when I was selling options for premium last year. Back then, I liked this kind of structure: selling options meant earning time value and volatility premium, and the more crowded the market and the more bullish the sentiment, the fatter the premiums. A funding rate that stays positive is essentially the same kind of signal: long positions in the futures market are too crowded, pushing up the cost of holding them. Under the usual mechanics of perpetual futures, funding is settled every 8 hours. Even if the rate is only 0.01%–0.03% per day, that adds up to a real holding cost over three days, and the higher the leverage, the more it hurts. Futures longs who are deeply underwater have their margin and liquidation levels hanging over them, so the more prices fall, the more trapped they become. Spot is easier to manage: there’s no liquidation level, so you can average down in stages and wait it out.

At these S&P 500 levels, I’m focused on the pace of dollar-cost averaging, not trying to call the bottom. If the index drops another notch, I add another tranche; the deeper it falls, the more I add. No predictions, just accumulation. For example, you could divide your allocation into several tranches, add one each time the index pulls back 3%–5%, increase the amount per tranche if the pullback exceeds 10%, then return to your regular DCA amount once it’s back in a normal range. The point isn’t to buy at the absolute bottom, but to replace “figuring out where the bottom is” with “building a bigger position in cheaper territory.” The 2022 rate-hiking-driven valuation sell-off is a good example: the S&P 500 fell about 19% for the year, and the Nasdaq fell about 33%. People who kept trying to call the bottom were exhausted, while those who accumulated in stages were able to lower their cost basis.

NVDA is down 30%, GOOGL a little over 30%, and MCD is down 30% too. When the leaders are all getting hit, it points to a broad valuation sell-off, not a company-specific story falling apart. The fact that even a defensive consumer leader like MCD is down 30% makes it clearer that the problem isn’t one company’s earnings report, but a simultaneous pullback in discount rates, risk appetite, and liquidity. We saw a similar picture in 2022: NVDA was down more than 50% at one point, and GOOGL was down around 40%. When the leaders are all selling off together, the more headlines there are and the louder they get, the easier it is to miss what’s really happening: the valuation anchor is shifting, not every individual headline.

DCA, at its core, is admitting that you can’t predict the short term while betting on the long-term direction. When prices fall, keeping a steady hand matters more than anything. What about you—are you waiting for a signal or buying according to plan?