$BTW The biggest trap with this—thinking that since the funding rate is high, shorting will make easy profit.
Over the past 30 funding rate intervals, it has stayed positive the entire time, and short accounts are also close to 70%. Some people buy spot on Alpha/Chain and simultaneously short on derivatives to collect the funding. The spot bid pushes the price higher; shorts can’t hold it and end up getting stopped out, which in turn keeps boosting the rally. This is also why the more BTW pumps, the more people want to short.
But this “strategy” isn’t risk-free arbitrage. Binance’s main platform doesn’t have a BTW spot trading pair—spot mainly trades on Alpha/Chain. Liquidity is thinner than in regular spot markets, so when the market turns, volatility can get even more savage.
What really matters isn’t how many shorts there are—it’s whether, after shorts increase, the price can still keep getting pushed higher. Once the funding rate drops, it can stabilize sideways and then you look for another opportunity. If the funding rate stays high, but the price can’t be pushed up anymore, then be careful—this move may be starting to weaken.
Don’t chase here, and don’t hard-short just because it has already pumped a lot.
$BTW #BinanceAlpha #Funding Rate
Over the past 30 funding rate intervals, it has stayed positive the entire time, and short accounts are also close to 70%. Some people buy spot on Alpha/Chain and simultaneously short on derivatives to collect the funding. The spot bid pushes the price higher; shorts can’t hold it and end up getting stopped out, which in turn keeps boosting the rally. This is also why the more BTW pumps, the more people want to short.
But this “strategy” isn’t risk-free arbitrage. Binance’s main platform doesn’t have a BTW spot trading pair—spot mainly trades on Alpha/Chain. Liquidity is thinner than in regular spot markets, so when the market turns, volatility can get even more savage.
What really matters isn’t how many shorts there are—it’s whether, after shorts increase, the price can still keep getting pushed higher. Once the funding rate drops, it can stabilize sideways and then you look for another opportunity. If the funding rate stays high, but the price can’t be pushed up anymore, then be careful—this move may be starting to weaken.
Don’t chase here, and don’t hard-short just because it has already pumped a lot.
$BTW #BinanceAlpha #Funding Rate