Bitcoin Funding Rates Plummet to 2023 Lows, Hinting at Market Bottom

The funding rates for Bitcoin have dropped to their lowest levels since 2023, a development that historically suggests a market bottom, as the cryptocurrency continues to push above $75,000. According to data from Glassnode, the seven-day moving average of funding rates has fallen to around -0.005%. Funding rates represent the periodic payments made between long and short traders in perpetual futures contracts, aiming to keep prices aligned with the spot market. A positive rate indicates bullish sentiment, with long traders paying short traders, while a negative rate reflects bearish sentiment, with short traders paying long traders. Despite the prolonged period of negative funding rates throughout March and April, bitcoin has continued its upward trend, rising from the low to mid $60,000s to around $75,000. Historically, deeply negative funding rates have often aligned with local price bottoms, typically resulting from crowded short positioning that can trigger a squeeze as bearish bets are closed. This pattern has been observed across multiple market cycles, including the COVID-19-induced market crash in March 2020, China's mining ban in mid-2021, the FTX collapse in November 2022, and the Silicon Valley Bank crisis in 2023. More recent episodes, such as the yen carry trade unwind in August 2024 and the April 2025 'Liberation Day' selloff, have also seen negative funding rates coincide with local lows. The persistence of negative funding rates indicates that bearish positioning remains high, even as prices trend upwards, suggesting that the market may be experiencing a 'wall of worry,' where short positioning could fuel further gains.