Two interpretations with different implications:
a) you're paid to go long so lots of people will buy
b) the equilibrium is implying people _need_ to get paid to go long, so they must think things are going down
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I don’t think that’s right. “I need to get paid to go long” feels like a weird thought given the Oracle will be higher than spot.
Also if you’re on the fence and there’s a pay increase on a long position, how is that not bullish?
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Negative funding --> shorts paying to longs --> futures are trading _below_ spot, not above it
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Bitmex Oracle price >> last traded bitmex price. I’d actually call last traded bitmex price spot.
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So if I see I’m getting a cheaper price than “the fair price” it’s hard for me to imagine anyone would think “I have to be paid to be long.”
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If enough people buy, the premium will go up and funding rates will flip to positive.
The fact that rates remain negative means that as soon as premium would get up to 0, there must be more sellers than buyers to drive the premium back negative.
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Not necessarily! If everyone and their mother came in to buy, but Oracle price remained elevated relative to last traded mex, negative funding should grow.
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If by oracle price you mean the futures price BitMEX uses to compare to the index: it's generally relatively close to the futures price, and so in general if the premium is very positive the funding will be positive too.
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Yes exactly. From my understanding all funding is determined from ^^ time weighted relationship to last traded mex. is that wrong? Sure they’re generally close, and I believe if they are within a band it settles at +.01%. If they are out of band, it quadratically adjusts.
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Generally it's based on the difference between the oracle (which is roughly speaking the price of mex futures, with some adjustments) and the price of the mex index (which is the coinbase/kraken/bitstamp/gemini/itbit weighted average)
Ya exactly! Super interesting you call that the Oracle whereas I call the other one the Oracle 😛 I think the latter is the Oracle because it’s their attempt at true price / what you get liquidated against / what chainlink would try and maintain if they were in this business.
So to jump back up here, what did you mean by enough people buying? I took it to mean enough people buying mex futures.
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Ah makes sense.
Yeah--if enough people buy MEX futures, then MEX futures premium vs index will go up and so funding rate will go positive. So maybe the fact that funding is negative is evidence that more people are selling than buying.
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