coindesk.com
Bitcoin layer 2 Stack Network's STX token on Monday rose to a fresh nine-month high of $0.97, bringing its month-to-date gain to 220%. The Ordinals-driven rally, however, failed to impress derivatives traders.
Data from Coinglass shows that the funding rates in the perpetual futures market tied to STX remained negative even as open interest, or the dollar value locked in the number of active perpetual futures contracts, doubled to $80 million.
In other words, new money entering the perpetual futures market amid the continued price rally is betting on a reversal. The negative funding rate – the cost of holding bullish long/bearish short positions in perpetuals – implies that leverage is skewed on the bearish side.
"It could be a case of traders fading the hype of STX and shorting, largely due to the return of deeply negative after every price rally in the last week," Conor Ryder, research analyst at Paris-based Kaiko, told CoinDesk. "I suspect traders are betting that there isn't a follow-up to Bitcoin NFTs and this is more of a flash in the pan."
Stacks Network, focused on unleashing Bitcoin's potential as a programmable blockchain, has been the beneficiary of the non-fungible token (NFT) on Bitcoin fever kicked off by the launch of the Ordinals protocol on Jan. 21. Ordinals are NFT-like art references inscribed on a satoshi, the lowest denomination of bitcoin (BTC).
Per Ryder, the negative funding rates could also be due to STX being a relatively illiquid token.
"As funding rates are the difference between spot and futures, when spot prices surge disproportionately more than derivatives, often due to illiquidity, this can cause funding to move deeply negative," Ryder said.
Another possibility is that some traders, who bought STX in the spot market early this month, sold perpetual futures to lock in profits on the long spot position and bypass potential price volatility over the coming days.