Funding fees for perpetual swaps have surged to over 10%, even hitting 20% on major exchanges

According to IntoTheBlock, perpetual swaps funding fees have spiked significantly on exchanges, reaching above 10%, with major exchanges recording up to 20% spikes. However, the current funding rate is considerably lower compared to the highs seen in the first quarter of this year, when rates reached over 60%. 

IntoTheBlock warned that the current increase in funding fees could indicate speculative overheating. The firm explained that it had concerns despite the current fees being lower than at the beginning of the year. 

Speculative heating refers to an unsustainable rapid increase in cryptocurrency market prices due to excessive speculation. Some indicators of speculative heating include rapid price increases, increased optimism among investors, very high trading volumes, and asset overleveraging. 

Beyond the increasing funding fees, futures premiums have increased on multiple exchanges, including Binance, Bybit, Deribit, and OKX. Per IntoTheBlock, perpetual swaps funding fees influence Futures premiums. 

Vetle Lunde, the Head of Research at K33 Research, revealed the increasing futures premiums while talking to CNBC last week. Lunde mentioned that BTC and ETH premiums stood at 14%, double the percentage recorded before the U.S. presidential elections. 

Ethereum funding rate hits an 8-month high

On November 12, the perpetual swaps funding rate for Ethereum hit an 8-month high, reaching about 6.1%. The coin has rallied about 40% since November 5, with bullish investors expecting a hit over $4,000.

CryptoQuant’s analyst, ShayanBTC, reportedly warned against potentially overheating Ethereum markets due to skyrocketing funding rates. According to the analyst, the rates could also indicate overleveraged Ethereum markets, which could lead to a risk of pullbacks. ShayanBTC further revealed that amid current funding rates, traders might require new strategies to cushion the prevalent risks. 

The firm still mentioned that the high rates could indicate bullish sentiment among investors as Ethereum futures remain positive. ShayanBTC pointed out the visible market confidence, especially after ETH breached the $3,000 mark. The coin rallied to over $3,400 before correcting, and it is currently trading at $3,302 at the time of writing. 

At the end of September, the analyst reportedly discussed the rising ETH funding rates, hinting at the potential recovery of ETH markets. The analyst supposedly said that the increase in buying activity by futures traders indicated a bullish outlook for the coin. 

CryptoQuant CEO warns about BTC/USDT overleveraging

$BTC-USDT perp market is overleveraged—2.7x higher than early this year, hitting an all-time high. I double-checked the data; it's accurate. Stay cautious. pic.twitter.com/MZUbedCuyM

— Ki Young Ju (@ki_young_ju) November 13, 2024

On November 13, CryptoQuant’s CEO Ki Young Ju warned about BTC/USDT overleveraged perpetual markets, reaching 270% more than at the beginning of the year. At the time, Young Ju warned investors of their positions once the pair’s price started to unravel. 

BTC’s price has been skyrocketing over the past few weeks, with a major driver being Trump’s victory in the November 5 elections. The crypto community has been bullish about the incoming president’s pro-crypto stance, with many expecting more legal clarity. However, another analyst explained that the overleveraging could mean more volatility in the crypto markets, leading to severe fluctuations in crypto prices. 

The CryptoQuant CEO also pointed out that perpetual funding rates were hitting a new high. The CEO of Kryptanium Capital, Daniel Yan, confirmed the rising funding rates, mentioning the rates for BTC perpetual funding, which had reached 0.05%. Yan expressed concern about the lack of equity rally amid the increasing funding rates.

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