Ethereum Funding Rate Turns Negative…Buy Signal Emerges but Macro Headwinds Weigh

Funding rates for Ethereum (ETH) perpetual futures have flipped negative—typically read as a buy signal—but caution is dominating the market as U.S. macro uncertainty intensifies.

According to Cointelegraph on the 3rd (local time), Ethereum fell as low as $2,110 intraday, plunging about 28% over the past week. Over the same period, investors cut exposure to risk assets and moved into cash and short-term Treasuries, while the tech-heavy Nasdaq index slid 1.4%.

Market jitters grew as excessive optimism around the artificial intelligence (AI) industry cooled. Concerns over AI-related valuations intensified after Nvidia CEO Jensen Huang said he has no plans to invest $100 billion in OpenAI. Adding to the pressure, PayPal’s disappointing quarterly results heightened vigilance over rising volatility.

Against this backdrop, the annualized funding rate for Ethereum perpetual futures turned negative. This implies short sellers are paying to maintain positions, a signal that bullish sentiment has become extremely depressed. Still, opinions are split on whether this fear-driven phase represents a strategic entry point.

Ethereum has underperformed the broader crypto market by about 10% over the past 30 days. Over the same period, Bitcoin fell 17%, while BNB declined 14% and Tron slipped 4%. The sharp drop in Ethereum prices triggered more than $2 billion in liquidations from leveraged long positions alone.

Slowing institutional demand is also a burden. U.S.-listed spot Ethereum exchange-traded funds (ETFs) recorded net outflows totaling $447 million over the past five days. Despite some companies continuing to accumulate Ethereum, roughly $14.4 billion worth of holdings tied up in ETFs is being viewed as potential selling pressure.

On-chain indicators are also pointing to weakness. As of January, monthly trading volume on Ethereum-based decentralized exchanges came to $52.8 billion, down 47% from $98.9 billion in October 2025. With network activity slowing and the burn mechanism’s impact weakening, expectations for supply contraction have also faded.

The market is increasingly assessing that a negative turn in funding rates alone is not enough to justify expectations of a short-term rebound. With weakening on-chain demand, ETF outflows, and macro uncertainty acting in tandem, analysts say Ethereum investor sentiment is likely to remain cautious for the time being.