A rare funding process in the Bitcoin futures market over the last two months has left investors, especially those in short positions, in a difficult situation. While negative funding rates were recorded in perpetual contracts for exactly 67 days, funding was realized 201 times with three payments in total during this period. While the BTC price was generally horizontal, the margins of short positions quietly decreased in this range, paving the way for mass liquidations when the expected squeeze came.
67 days of negative funding pressure
In perpetual futures, funding payments are transferred between investors on a regular basis to keep contract prices in line with spot. When the funding rate is positive, long position holders pay short investors; when the rate is negative, short position holders have to pay. Recently, as funding in the BTC market has remained constantly negative, shorts have experienced a decrease in margin from their accounts every eight hours.
In particular, although prices remained flat, this constant negative funding led to critical losses in the margin accounts of short investors. CryptoAppsy According to the current data reflected on the screens, towards the morning of May 18 – especially with the opening of the European markets – chain liquidations were recorded, which led to the closing of approximately 590 million dollars of short positions.
Mini dictionary: Perpetual futures (Perpetual swaps) are derivative contracts that remain open continuously because they have no maturity date and are offset by funding payments to remain in line with the spot price.
The main criteria that determine the liquidation price
While short positions were exploding, a remarkable detail emerged: Transactions opened with the same size, the same price and the same leverage were closed at completely different liquidation levels on different platforms. The reason for this was basically the margin requirements of the exchanges and the working principles of the liquidation engines.
For example, Binance requires a 0.5% margin for the bottom tier of standard BTC perpetual transactions. This rate increases as the position grows. There are serious differences in both the initial margin rate and increase curves in competing exchanges. Small margin differences can change the liquidation price by thousands of dollars on highly leveraged positions. Additionally, not every platform’s liquidation engine works the same; While some close part of the position and leave the rest active, some directly liquidate the entire position.
| Exchange | Margin Rate (Lowest) | Liquidation Type |
|---|---|---|
| Binance | 0.5% | gradual (partial) |
| Bybit | 0.5% | gradual (partial) |
| OKX | 0.4% | full |
| BitMEX | 0.5% | full |
Liquidation engine and funding ceiling differences
While exchanges such as Binance and Bybit use “gradual liquidation”, when a position falls below the margin limit, they close the position in small pieces and keep the remaining part in the system. Some other platforms immediately close the entire position when the margin limit is exceeded. In rapid market movements, this difference can have serious consequences between the trader losing his entire position or preserving only part of it.
In addition, the ceiling values determined for the funding rate in each exchange are also important. While certain platforms limit the funding rate for payments made every eight hours, some are more flexible or have higher ceilings. When there is negative funding for a long time, the loss in the position grows much faster in the high cap and low margin market.
Warning from experts: Not only the transaction fee but also the risk model should be compared
Anton Palovaara, founder of Leverage.Trading, states that most investors focus on the transaction fee, liquidity or withdrawal speed when opening a leveraged position, but the main critical factors are often overlooked.
“The three most important numbers to look at before opening a leveraged position are: the margin level according to the position size, whether the exchange applies gradual or full liquidation, and the funding ceiling. These are usually only written in the documents and no one looks at them. But these three variables determine everyone’s fate.”
The recent 67-day negative funding period strikingly revealed why the same position was liquidated in completely different ways in different exchanges. Similar fluctuations may occur again in the future, and according to experts, investors need to pay attention to stock exchange selection and risk protocols in order to manage their risks.
