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Author: Admin | 2025-04-28
A premium over the spot price, and vice versa. This difference, called the basis, is another good indicator to assess market sentiment.BTC Basis. Source: okx.comWhen the basis is positive (bullish), it means the futures price is higher than the actual spot price. When the basis is negative (bearish), it indicates that the futures price is lower than the spot price.Bitcoin perpetual futuresIn addition to the standard futures discussed above, Bitcoin markets also support perpetual futures, which, true to their name, are contracts without an expiry date.Since there's no settlement date, neither of the parties has to buy or sell. Instead, they're allowed to keep their positions open as long as their account holds enough BTC (margin) to cover them.However, as opposed to standard futures, where the price of the contract and the underlying asset ultimately converge when the contract expires, perpetual futures have no such reference date in the future. Perpetual futures use a different mechanism to enforce price convergence at regular intervals, called the funding rate. The purpose of the funding rate is to keep the price of a contract in line with the underlying asset’s spot price, discouraging major deviations.It's important to note that the funding rate is a fee exchanged between the two parties of a contract (the long and short parties) — not a fee collected by the exchange.If, for instance, the value of a perpetual futures contract keeps rising, why would shorts (people on the selling side) continue to keep a contract open indefinitely? The funding rate helps balance such a situation. The rate itself varies and is determined by the market. How do BTC perpetual futures work?For example, if a perpetual futures contract is trading at $9,000 but the spot price of BTC is $9,005, the funding rate will be negative (to account for
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