Bitcoin funding rates hit most negative since 2023, history suggests bottom is in
Despite a surge in short positioning, bitcoin has climbed toward $75,000, with past episodes of negative funding rates often aligning with local market bottoms.
What to know:
- Bitcoin funding rates have dropped to their lowest levels since 2023, signalling heavy short positioning even as prices trend higher.
- Despite the current sustained stretch of negative funding throughout March and April, bitcoin has continued to grind higher, climbing from the low to mid $60,000s to around $75,000.
- Historically, deeply negative funding rates have coincided with local bottoms, including March 2020, mid 2021, and the FTX collapse in 2022.
Funding rates are periodic payments exchanged between long and short traders in perpetual futures contracts, designed to keep prices aligned with the underlying spot market. When the rate is positive, long traders pay short traders, reflecting bullish positioning. When the rate turns negative, shorts pay longs, indicating a market skewed toward downside bets.
Despite the current sustained stretch of negative funding throughout March and April, bitcoin has continued to grind higher, climbing from the low to mid $60,000s to around $75,000.
Historically, deeply negative funding rates have often coincided with local bottoms in bitcoin’s price. This dynamic typically reflects crowded short positioning, which can create the conditions for a squeeze higher as bearish bets are unwound.
This pattern has played out across multiple market cycles. In March 2020, during the COVID-19 induced market crash, bitcoin fell to around $3,000 as funding rates turned sharply negative.
