Bitcoin Funding Rates Stay Negative for Three Months, Historically a Bullish Signal

Bitcoin funding rates in the futures market have stayed in negative territory for more than three months. Funding rates are periodic payments in perpetual futures contracts designed to keep long and short positions in balance. When the rate stays negative, it indicates short positions are outweighing longs.

In a report published on May 15, CryptoQuant contributor Zakariya Sharif wrote that Bitcoin’s funding rate is currently around -0.009%. That means traders with short positions are paying long holders to maintain bearish bets.

Funding rates remained positive from May to November last year as market optimism persisted, Sharif wrote. They turned negative after Bitcoin’s sharp decline, suggesting traders have remained bearish even as the price rebounds.

Sharif also cited earlier episodes. When Bitcoin traded near $4,000 during the Covid-19 crash in March 2020, funding rates were negative before the token later rose to $69,000. He said similar patterns appeared during the 2022 collapses of Terra and Three Arrows Capital, as well as the FTX crisis. Extended periods of negative funding rates after steep declines have been one of the clearest bullish signals in the digital-asset market, he wrote.

Bitcoin has already recovered from $65,000 to $77,600, according to Sharif. If funding rates remain negative while the price continues to rise gradually, the likelihood of a short squeeze could increase.

Still, he added that the bullish scenario could be invalidated if Bitcoin falls decisively below $65,000.