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The Significance of Negative Capital Rates on Bitcoin Perpetual Contracts

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It is reported that the capital rate of Bitcoin perpetual contract will turn negative for the third time in 2023. Each time the capital interest rate becomes n…

The Significance of Negative Capital Rates on Bitcoin Perpetual Contracts

It is reported that the capital rate of Bitcoin perpetual contract will turn negative for the third time in 2023. Each time the capital interest rate becomes negative, the short liquidation volume will increase as the BTC price rises. In January and February, when the capital rate in January is negative, the duration is slightly longer than that in February.

In 2023, the capital rate of Bitcoin perpetual contract will be negative for the third time

Analysis based on this information:


Bitcoin has been a topic of conversation in the financial sector for years now, and it comes as no surprise that it has caught the attention of investors worldwide. With the advent of Bitcoin Perpetual Contracts, the buying and selling of the digital currency have become considerably more sophisticated. However, there has been a recent report that the Capital Rate of Bitcoin Perpetual Contracts will turn negative for the third time in 2023. In this essay, we will explore the significance of negative capital rates and their effects on Bitcoin Perpetual Contracts.

A negative capital rate means that the cost of holding a long position has surpassed the interest payout that the trader earns. As a result, traders would be subject to a negative interest rate known as the Funding Rate. This Funding Rate causes the short liquidation volume to increase as the price of Bitcoin rises. Since the majority of traders tend to be long, they would be required to pay the cost of borrowing Bitcoin from short sellers, creating a negative capital rate.

Bitcoin Perpetual Contracts require that traders continuously update their position to maintain a stable trading balance. This means that traders would need to pay the Funding Rate regularly, which could become burdensome in the long run, thus leading to liquidation. Liquidation is the process by which the trader’s position is forcibly closed due to their inability to pay the Funding Rate. Therefore, a negative capital rate means that the long traders could lose a significant amount of money if they cannot keep up with the Funding Rate.

In addition, the length of time that a capital rate remains negative affects traders’ ability to make profits. This is evident from the varying durations of negative capital rates in January and February. Thus, traders must be alert and attentive to the duration of negative capital rates, as this will inevitably affect their profit margins.

In conclusion, negative capital rates are a significant factor for traders on Bitcoin Perpetual Contracts. The effects of short liquidation volume and the burden of paying the Funding Rate make it imperative that traders pay close attention to the capital rate’s duration. The possibility of the third negative capital rate for Bitcoin Perpetual Contracts in 2023 indicates that proper risk management and strategy must be implemented by traders to mitigate losses.

Keyword added: risk management

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