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)
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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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I don’t think you can quite say that because it makes strong assumptions about mex index keeping the same demand profile! As mex inches up it should push higher.
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True, but: let's say that someone goes out and buys $500m of MEX futures. That should move the index up--but it should move MEX up more.
another way to think of that is: if it doesn't, who sold that $500m of MEX futures to the guy below the index price?
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Maybe. Maybe it’s a better bet for that guy to spend another $25 million (😜) pushing the Oracle up and build himself a nice negative funding tailwind.
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From what I’ve seen in practice, awry funding is pretty sticky.
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That too but I meant oracle spot differential when blown out. Could also call basis. Another way to put it is when basis is blown out it usually doesn’t move back inline fast.
On tight basis stickiness, my theory is if basis is sub .05%, funding fixes at .01% no matter what!
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Yup!
But if the premium remains blown out for a while, you can sit there collecting the funding rate every 8h always in the same direction--so still means that shorts are paying 3 times a day to keep their short, and longs getting paid for it, and still more sellers than buyers.
Not necessarily indicative of still more sellers than buyers since funding is time weighted. Sellers vs buyer pressure can change instantaneously, funding experiences a lag.
Still to your point, not sure who’s out there paying funding when it goes parabolic.
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Even more egregious, who’s longing perp shorting further out on the curve at this flat?? 😂🤷♂️😬😱 I have a lot of trouble rationalizing why either of these things happen.
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