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FR / Funding Rates

Funding Rates

INTERVALS 
Tier 1:  1M, 1W, 3D, 1D	
Tier 2:  1M, 1W, 3D, 1D, 12h, 4h, 2h, 1h, 15m, 10m, 5m, 1m	
Tier 3:  1M, 1W, 3D, 1D, 12h, 4h, 2h, 1h, 15m, 10m, 5m, 1m

Funding Rates

Definition

Funding Rates (FR), known as funding fees, are a key indicator in the cryptocurrency futures market. This indicator shows the positions, whether long (Long) or short (Short), that traders are taking in the futures markets.

How It Works

Futures Market: In futures contracts, funding rates are adjusted at regular intervals, helping to balance the contract price with the market price of the underlying asset.

Long vs. Short: Traders in Long positions pay funding fees to traders in Short positions, or vice versa, depending on how funding rates are set by the market.

Significance

Extreme Levels: Extremely high or low funding rates can indicate an overheated market (too many Long or Short positions) or market capitulation. Such conditions often signal that the market may soon experience a significant change in direction.

FR Alerts: Whether funding rates are rising or falling, they can be treated as a warning of a potential change in the local price trend.

Interpretation

Indicator	Interpretation
High FR	May signal excessive optimism (greed) and a potential future price decline.
Low FR	Indicates pessimism (fear) in the market, which may precede price increases.

Analyzing funding rates is useful in conjunction with other market indicators and on-chain data, allowing for a more comprehensive understanding of current market sentiments and potential Bitcoin price trend changes.|

Updated on: 07/03/2024

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