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Bitcoin: How a surge on this front could be ‘dangerous’ for BTC

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Bitcoin perpetual swaps funding rates have rallied to multi-year highs on Binance and Bybit.
The Crypto Fear & Greed Index showed that the market is in a state of extreme greed.

Bitcoin [BTC] borrowing costs on leading cryptocurrency exchanges like Binance and Bybit have reached their highest point since 2021, IntoTheBlock noted in a recent post on X (formerly Twitter). This indicates a surge in leveraged trading.

According to the on-chain data provider, on 14th March, BTC perpetual swaps funding rates on Binance and Bybit recorded highs of 0.06% and 0.09%, respectively.

High Leverage equals high funding rates

Perpetual swaps are a type of derivative contract that allows traders to speculate on the price of an asset without actually owning it.

The funding rate is a fee exchanged between traders to ensure that the price of the perpetual contract stays close to the spot price of the underlying asset.

When an asset’s funding rates surge, as in this case with BTC, it suggests that there’s an unusually high demand for long positions compared to short positions. This indicates that more traders are betting on the price of BTC increasing than those betting on it decreasing.

Although this commonly indicates the presence of significant bullish sentiment in the market, the volume of trades executed using high leverage also means that the market is overheating.

High-leverage trading often reflects market sentiment. If traders are highly bullish and are using leverage to open long positions, this sentiment can drive up the funding rates.

How much are 1,10,100 BTCs worth today?

However, an unabated rally in B

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Author: Abiodun Oladokun

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