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

• Bitcoin perpetual swaps funding charges have rallied to multi-year highs on Binance and Bybit.
• The Crypto Worry & Greed Index confirmed that the market is in a state of utmost greed.

Bitcoin [BTC] borrowing prices on main cryptocurrency exchanges like Binance and Bybit have reached their highest level since 2021, IntoTheBlock famous in a recent post on X (previously Twitter). This means a surge in leveraged buying and selling.

In response to the on-chain knowledge supplier, on 14th March, BTC perpetual swaps funding charges on Binance and Bybit recorded highs of  0.06% and 0.09%, respectively. 

Excessive Leverage equals excessive funding charges 

Perpetual swaps are a kind of spinoff contract that enables merchants to invest on the value of an asset with out really proudly owning it.

The funding fee is a payment exchanged between merchants to make sure that the value of the perpetual contract stays near the spot worth of the underlying asset. 

When an asset’s funding charges surge, as on this case with BTC, it means that there’s an unusually excessive demand for lengthy positions in comparison with brief positions. This means that extra merchants are betting on the value of BTC growing than these betting on it reducing. 

Though this generally signifies the presence of great bullish sentiment out there, the quantity of trades executed utilizing excessive leverage additionally signifies that the market is overheating. 

Excessive-leverage buying and selling typically displays market sentiment. If merchants are extremely bullish and are utilizing leverage to open lengthy positions, this sentiment can drive up the funding charges. 

 How a lot are 1,10,100 BTCs price immediately?

Nonetheless, an unabated rally in BTC’s funding charges poses sure dangers. As per the findings shared by a pseudonymous CryptoQuant analyst  in a report dated sixth March, the analyst emphasised the implications of a surge within the funding charges of an asset.

“Nonetheless, whereas rising funding charges sometimes accompany a bullish market sentiment, excessively excessive values could be harmful. Elevated charges enhance the danger of lengthy liquidation cascades, which can end in heightened market volatility and sudden corrective actions.”

Furthermore, this surge in funding charges comes at a time when the market is overly “grasping.” As of this writing, the Crypto Fear & Greed Index is 81, indicating that the market remained in a state of utmost greed. 

A market pushed by excessive greed is commonly liable to sudden reversals, as sentiments can shift shortly. Detrimental information or a change in market dynamics might set off a sell-off as buyers rush to chop their losses, resulting in a market correction.

At press time, BTC exchanged fingers at $69,000, per CoinMarketCap’s knowledge.