hello, thanks again for the insight, this is really interesting. I would have a stupid question regarding the Basis cost STH/LTH ratio. I do not get why the ratio grows when the LTH cost basis increases? Shouldn't it be the opposite? Would you be able help me understand? Thanks
Hi Sam, thank you for your answer. Sorry to be a pain but I would have a second question, as I try to understand one of the sentence relative to funding rates: " During the spring of 2021, bullish perpetual swaps traders were paying annualized rates of up to as high as 100% of their notional position size to remain long."
To me Funding Fee is calculated as follows:
Funding Fee = Position Value x Funding Rate
Position Value = Quantity of Contract/Mark Price
Example:
Trader A holds a long position of 10,000 BTCUSD contracts and the Mark Price is 8,000 USD at the funding timestamp with the current funding rate at 0.15% which is the maximum aggregated rate we had in Feb 2021.
Position Value = 10,000/8,000 = 1.25 BTC
Funding Fee = 1.25 BTC x 0.15% = 0.0015 BTC
Even on an annual basis I fail to understand how it matches wit the notional.
hello, thanks again for the insight, this is really interesting. I would have a stupid question regarding the Basis cost STH/LTH ratio. I do not get why the ratio grows when the LTH cost basis increases? Shouldn't it be the opposite? Would you be able help me understand? Thanks
The name can be misleading. The ratio is calculated as LTH Realized Price (cost basis) over STH Realized Price.
Hi Sam, thank you for your answer. Sorry to be a pain but I would have a second question, as I try to understand one of the sentence relative to funding rates: " During the spring of 2021, bullish perpetual swaps traders were paying annualized rates of up to as high as 100% of their notional position size to remain long."
To me Funding Fee is calculated as follows:
Funding Fee = Position Value x Funding Rate
Position Value = Quantity of Contract/Mark Price
Example:
Trader A holds a long position of 10,000 BTCUSD contracts and the Mark Price is 8,000 USD at the funding timestamp with the current funding rate at 0.15% which is the maximum aggregated rate we had in Feb 2021.
Position Value = 10,000/8,000 = 1.25 BTC
Funding Fee = 1.25 BTC x 0.15% = 0.0015 BTC
Even on an annual basis I fail to understand how it matches wit the notional.
i do not like hte pdf version. it's prettier but less useful.
Good feedback. We will offer both Substack option and PDF going forward.