Crypto Traders Lever Up as Bitcoin Creeps Back Toward All-Time High

The recent rise appears to show traders finding a renewed appetite for risk taking following a market shakeout over the past of couple weeks.

AccessTimeIconMar 30, 2021 at 5:08 p.m. UTC
Updated Sep 14, 2021 at 12:33 p.m. UTC
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Bitcoin traders appear to be ratcheting up bets on a fresh rally, and they're taking on more leverage – and risk – in cryptocurrency derivatives markets.

In the past few days, the cost to fund a long position in the market for bitcoin (BTC) perpetual swaps, a type of derivatives in cryptocurrency markets similar to futures contracts in traditional markets, has broken above neutral levels for the first time since mid-March, according to Arcane Research, a Norwegian analysis firm.

The average cost is now pushing toward 0.08%. That's still well below a level close to 0.12% witnessed earlier this month when bitcoin surged to an all-time high price above $61,000, or earlier in the year, when the funding cost was roughly twice as high.

But the recent rise appears to show traders finding a renewed appetite for risk taking following a market shakeout over the past couple of weeks. Bitcoin's price fell to just above $50,000 as recently as March 25.

“The funding rate spikes coincide with strong optimism and high leverage from short-term traders,” according to the Arcane report.

  • “The funding rates have once again started to move upwards after two weeks in the neutral territory,” similar to the final weeks of January and February, according to Arcane.
  • “After the initial breakouts from the neutral territory, bitcoin began moving upwards towards new price highs, but not without volatility."
  • A positive funding rate in cryptocurrency derivatives markets means traders with long positions pay those with short positions.
  • Eventually, rising payouts from long traders to short traders could make downward price bets more attractive using bitcoin perpetual swaps. But BTC optimism is not yet at an extreme, which means longs could remain active at support levels.
Chart shows BTC price and perpetual futures funding rate.
Chart shows BTC price and perpetual futures funding rate.

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