What positive or negative funding rates means?

Firstly, the fluctuation in funding rates signifies the liquidity and activity of market orders. The larger the market order volume, the faster the changes in both positive and negative funding rates.

When the funding rate increases in either the positive or negative direction, it means that there is a significant bearish sentiment and a high number of market orders for short positions. This usually does not have a substantial impact on mainstream cryptocurrencies, but it may follow a pattern of change for some altcoins such as -0.5, -0.75, -1, -1.5, -2. In extreme market conditions with significant fluctuations in funding rates, exchanges generally make timely adjustments (such as updating the leverage and margin levels of a particular coin's perpetual contract) to protect user interests.

Simultaneously, in situations where the funding rate is very high, arbitrage traders and market makers engaging in reverse operations may enter the market a few minutes before the funding settlement point and close their positions to earn profits as soon as the settlement occurs. Users should pay attention to the changes in funding rates during their trading process.