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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Ethereum Funding Rates Hit The Low Amid The Shift From PoW

Sarah
Sarah
2 years ago
2 mins read
Ethereum Funding Rates Hit The Low Amid The Shift From PoW

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The Ethereum upgrade has shifted the network from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The Ethereum mainnet and the Beacon Chain will finally merge as a single blockchain through the transition.

According to the estimations of EtherNodes, the Ethereum transition will occur if there are no underlying technical challenges. Before now, the team of developers confirmed the checklist for the Merge before releasing it.

Related Reading: Investor Sentiment Sees Sharp Positive Spike Following Crypto Market Recovery

There have been several sentiments and reactions concerning the Merge lately. This significantly impacted ETH and all its derivatives in the crypto market. Some participants are accumulating more expecting a sudden spike in price. But some are even disposing of what they have due to fear of volatility.

Sentiments On Merge Affects ETH Funding Rates

Currently, expectations and more attention are glued to the Ethereum blockchain. But based on the state of the miners, there could be variation in the transition estimated time. From the look of things, the ETH futures traders seem to be calculating their moves.

The data from CryptoQuant revealed that Ethereum funding rates had hit a new all-time low. This recent point marks the lowest for the Ether derivatives.

ETH funding rate is a metric that provides forced convergence of prices between the contract and the underlying asset. It indicates the payment that comes from long to short or short to long traders. The difference between an asset’s spot and the perpetual futures contract prices provides the funding rate.

Negative Value For Ethereum Funding Rates And Implication

CryptoQuant data give a negative value for the Ethereum funding rates. This means that the dominant force in the order book goes to short traders. Hence, will be paying long traders accordingly.

Futures traders place high importance on funding rates. This is because these rates are like spontaneous catalysts that could alter their trading stance positively or negatively. As a result, they will make huge profits or suffer massive losses.

Related Reading: Bitcoin Must Hold This Level Or Risk Falling To $10,000

Usually, traders that pay high funding while using high leverage will likely have losses. However, such a flip is possible to occur even when the market is not under a severe bearish influence. So, they may resort to hedging as protection.

 Ethereum Funding Rates Hit The Low Amid The Shift From PoW
Ethereum expected to surge l Source: ETHUSDT on TradingView.com

The negative value of the ETH funding rates implies that futures traders are currently hedging their spot exposure. A considerable explanation for such results points to the Merge. Hence, the traders could exercise more caution due to potential volatility that could erupt after the transition.

Featured image from CNN, chart from TradingView.com
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Sarah
Sarah

Sarah

Sarah is a journalist who continues to share her passion for writing through her writing in DeFi, FinTech, and Cybersecurity.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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