Negative funding rates for Bitcoin were observed briefly, an occurrence Van Straten suggests usually signals a nearby bottom.

Bitcoin Funding Rate Dips Negative, Hinting at Market Recalibration Amid $90K Retest

For the first time in 2025, Bitcoin’s (BTC) perpetual futures funding rate briefly turned negative, according to Glassnode data. The dip occurred during a volatile session on Thursday, as Bitcoin’s price slipped to $92,500 before recovering to trade above $94,000.

Negative funding rates are often seen as a sign of bearish overextension, signaling that short sellers are dominating the market. These moments can precede price recoveries as traders reposition and liquidate excessive bearish bets.

Understanding the Shift in Funding Rates

The perpetual funding rate is a mechanism used by exchanges to balance the price of futures contracts with the spot market. Positive rates indicate a bullish bias, with long positions paying funding fees to short positions. Conversely, negative rates suggest a bearish sentiment, as shorts pay funding fees to longs.

On Thursday, the funding rate dipped to -0.001%, reflecting heightened bearish activity. While mild compared to extreme historical events like the March 2020 crash (-0.309%), the negative rate signals that the market may have reached a temporary inflection point.

Sentiment Swings at Key Levels

Bitcoin has been oscillating between $90,000 and $100,000 since mid-November, fostering a cyclical sentiment pattern. Optimism rises as BTC approaches $100,000, only to turn sharply bearish near $90,000. Thursday’s dip in funding rates mirrors this psychological tug-of-war, with traders overreacting to short-term price movements.

Derivatives’ Growing Influence

Though derivatives like perpetual futures account for a fraction of Bitcoin’s market cap, their influence on price volatility is outsized. Leverage amplifies market swings, and periods of negative funding rates often indicate excessive short positioning.

In this case, the shift to negative funding triggered a cascade of short liquidations, easing downward pressure and stabilizing Bitcoin’s price. Such events highlight the dynamic role of leveraged positions in shaping short-term market trends.

Historical Patterns and Market Outlook

Since 2023, Bitcoin’s funding rates have been predominantly positive, in line with the broader bull market. However, brief dips into negative territory—seen during market shocks in 2023 and 2024—have often coincided with local price bottoms and subsequent recoveries.

Thursday’s negative funding rate underscores the ongoing battle between bulls and bears at critical levels. While it doesn’t guarantee an immediate price rebound, it serves as a potential marker of market recalibration, as bearish excesses are corrected.

As Bitcoin consolidates near $94,000, traders will watch for additional signals, such as volume spikes or technical breakouts, to determine whether this is a prelude to another rally or further downside testing near $90,000.