Traders rushed to bet against ACE, pushing the fee for holding short positions to negative 0.0848%. When funding turns deeply negative, short sellers must pay regular fees directly to buyers.
Imagine ACE is trading quietly at about $0.17. Suddenly, a large wave of traders all want to place bets that the price is going to fall.
Over ten minutes, so many traders piled into downward bets that the market became heavily skewed. Even though the price stayed near $0.17, the cost to maintain those downward bets dropped continuously from -0.0811% to -0.0848%.
Over ten minutes, so many traders piled into downward bets that the market became heavily skewed. Even though the price stayed near $0.17, the cost to maintain those downward bets dropped steadily from -0.0811% to -0.0848%.
In derivative markets, every bet needs a counterparty. When too many traders bet on a drop, the market charges them a recurring fee, called the funding rate, and pays it directly to the buyers to incentivize balance.
Ten alerts fired in ten minutes because the fee kept getting more punitive as more sellers arrived. A persistent negative rate shows that sellers are determined enough to pay real money just to keep their positions open.