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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Replying to
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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Replying to
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.
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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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