Funding Rate Sansheets Model - The Next Step to Finding Where FOMO & FUD Lies
If you've joined us for some recent webinars, or read the past few months of Santiment's Insights, you've likely come across our increased interest in using Funding Rates to identify where the trading crowd is placing their bets.
The Funding Rate metric, short for Perpetual Contract Funding Rate in this case (as there are other variants) is a fee paid by one side of the perpetual contract to the other. When the funding rate is positive, Longs pay Shorts. When the funding rate is negative, Shorts pay Longs.
In other words, when you see an excessively high funding rate for an asset, it's generally a sign that there is an abnormal amount of longs, which indicate some serious FOMO happening. And when serious FOMO is happening, price tops generally occur. Alternatively, when there is an abnormal amount of shorts, there is a serious amount of FUD happening. And when serious FUD is happening, price bottoms generally occur.
What the new Funding Rates Sansheets model does is automatically calculate the funding rates on Binance (in USD), as well as the funding rates on FTX. Santiment has extensive Funding Rate metrics for hundreds of assets on these two exchanges. Both Binance and FTX have shown major alpha by going against the common trend of traders, so averaging these two funding rates together for assets is an easy way to see tops and bottoms that are forming.
Here is a look at how the main chart view looks, which provides a snapshot of where the average funding rate stands for the 30 largest non-stablecoin assets by market cap:
You will notice that there are solid red, yellow, and green bars, along with some much fainter red and green bars that are transparently blended in to the background. There are also some dashed lines, and three different colored squares for each asset that are more visible if the funding rate has been moving a lot recently.
Let's go over what the solid bars mean first:
Funding rates are defined by 3 distinct colors:
- Green indicates that shorts are paying longs to an excessive degree, and prices are more likely to rise against the rest of the markets to liquidate the large number of short positions.
- Red indicates that longs are paying shorts to an excessive degree, and prices are more likely to fall against the rest of the markets to liquidate the large number of long positions.
- Yellow indicates that the average funding rate between Binance (USD) and FTX are resting between 0 and 0.01, and are relatively neutral. Historically, many would argue that a neutral funding rate can actually be considered slightly bullish, but for the purpose of keeping all data objective, we advise perceiving a neutral funding rate as a neutral price signal.
In terms of the faint green and red bars, these represent the highest and lowest the respective asset's funding rate has gotten in the past three months. This is important for context purposes, as an asset like Bitcoin typically doesn't have the same wild swings in funding rates as an asset like Shiba Inu or a more sentiment-driven project.
You can compare an asset's current funding rate (the solid colored bar) to their maximum or minimum funding rate (the more faint bar) to see just how close it currently is to its 3-month maximum or minimum. This will help signal whether it's in an extreme funding rate position, relative to its recent highs and lows, where not all assets have those same extremes.
A couple important things to note:
- If you see a green or red bar with no faint green or red bar behind it, that means the funding rate IS at its maximum or minimum for over the past three months. The solid bar is fully overlapping the faint bar in this instance, which is intentional.
- If you see no faint green OR red bar, that means that the funding rate has ONLY been in neutral yellow territory for the past three months. This is very rare, but can absolutely happen.
As for the red, blue, and green squares that you can see on every asset (some more clearly than others), these represent the average funding rate 8 hours ago (in red), 16 hours ago (in blue), and 24 hours ago (in green). Binance funding rates are updated every 8 hours ago by the exchange. So providing context about how the average funding rates between Binance and FTX are fluctuating at these time intervals can be helpful in seeing the recent trends and changes.
There is also a thick black dashed line, which resembles the average funding rate of the 30 assets displayed on the chart. If a particular asset is well above or well below the dashed line, that can provide you with some additional insight as to where it sits relative to the rest of the pack.
And to go along with the thick black dashed line, there are three thin colored lines to provide the average funding rate over the past 8 hours (red dashed line), past 16 hours (blue dashed line), and past 24 hours (green dashed line). These colors, as you would expect, correlate with the same colors used for the square points.
As a bonus, you can also edit the projects you want this Sansheets model to track for you. Simply head to the Data tab, and simply modify the asset's slug in Row 1 that is printed in white text:
Currently, the assets correlate with market cap rank, where stablecoins are excluded. But you can change them however you prefer!
If you'd like access to this brand new Sansheets spreadsheet, you can access it here. Remember that you will only be able to access the model and load Santiment's API data for it if you are a Sanbase PRO member, which you can sign up for here if you aren't a member already.
Once you have your Sanbase PRO account (or if you already do), you'll then want to use the link to the model above and follow these steps on the Google Sheets file:
- Go to File -> Make a Copy
- Download Sansheets. These are easy instructions to do so.
- Plug in your API
- Give the newly created copy you made a quick browser refresh and wait a couple of minutes to watch if data is loading
- If you're having trouble getting the data to load on a model, head to the 'Data' tab on the far right of the spreadsheet, and go to the yellow cell. Then delete the cell formula, and hit Undo. This should manually refresh the data.
Should you have difficulty navigating the spreadsheet with your PRO account and need some assistance, you can feel free to DM Brian on Discord, and he can walk you through getting everything set up!
Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
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