Cryptocurrency traders are paying up to 100% in interest to fund Ethereum (ETH) long positions.
Buy Now, Pay Later
According to popular Deribit researcher Hasu, the Ethereum market is currently highly leveraged. With the majority of traders positioning long, there is a notable rise in the funding rate.
This creates the potential for large returns but also sharp pullbacks. Hasu goes on to suggest that a tipping point, at which traders flip from long to short positions to earn the higher funding rate may be close.
Leveraged trading allows traders to borrow funds or assets in order to increase the return from a particular position. Traders are usually required to pay interest on what they borrow at regular intervals.
If the position they enter goes against them, leveraged traders face liquidation in order to pay back their funders.
Ethereum: To the Moon, and Beyond?
The increase in ETH longs comes as the cryptocurrency market’s second-largest token closes in on its all-time high of $1,432.38. Ethereum transactions have also surged over 50% in January, settling more transactions on its network than Bitcoin.
Stablecoins such as Tether and DAI that sit on the Ethereum network are responsible for most of this activity. Additionally, several Decentralized Finance (DeFi) tokens also use the Ethereum blockchain and they have seen hefty gains of late.
After ‘hodling’ since 2018 in a three-year-long bear market, Ethereum fans may now be reaping the rewards. Analysts expect the number two cryptocurrency to continue gaining as bitcoin (BTC) settles just under its all-time high of $41,946.74.
At press time, ethereum was trading around $1,417.05.
Alt Season May Finally Be Here
Some in the cryptocurrency community believe ethereum’s latest surge will lead to the much-anticipated ‘alt-season.’ Cryptocurrencies such as Polkadot (DOT), Chainlink (LINK), and NEO are all up considerably in the past few weeks.
Even cryptocurrency’s most entertaining token, Dogecoin, has seen parabolic gains, which don’t seem to be slowing down. In 2018, following bitcoin’s push to $20,000, altcoins rallied significantly, with some seeing ten-fold increases in value.
As institutions like Grayscale continue their large scale purchases of bitcoin, many wonder whether the resulting price appreciation will trickle down and trigger the largest alt-season in the market’s history.