For the first time in 2025, Bitcoin’s perpetual futures funding rate turned negative, a development that analysts suggest could signal a local price bottom. Data from Glassnode shows the funding rate dipped to -0.001% on Thursday, marking a rare event in the ongoing bull market.
Bitcoin Price Swings Between $90,000 and $100,000
Bitcoin (BTC) has remained in a volatile trading range between $90,000 and $100,000 since mid-November. Sentiment among investors tends to flip bullish as Bitcoin approaches the higher end of this range, while bearish sentiment dominates as the price nears the lower end.
“Bitcoin often moves where maximum pain occurs,” said market analyst Van Straten, referring to the current range-bound price action.
The Role of Derivatives in Market Volatility
Derivatives, including futures and options, contribute to Bitcoin’s price swings despite representing only a small portion of its total market capitalization. The futures perpetual funding rate, a key metric, measures the periodic payments between long and short positions in perpetual futures contracts.
- Positive Funding Rate: Long positions pay short positions, typically observed during bull markets.
- Negative Funding Rate: Short positions pay long positions, often seen in bearish conditions.
During bullish phases, funding rates are usually positive as traders bet on continued price increases. However, when the market overheats, corrections and liquidation cascades often follow. Conversely, in bearish conditions, negative funding rates can trigger sharp rebounds as price floors are established and traders rush to cover their positions.
A Signal of a Local Bottom?
On Thursday, Bitcoin’s funding rate briefly turned negative at -0.001%, leading to a leverage flush and a sentiment shift that pushed prices back above $94,000. Although this negative rate was mild compared to historical events—such as the March 2020 COVID-19 crash where funding rates hit -0.309%—it still highlights the potential for a local bottom.
“Negative funding rates don’t guarantee immediate price rebounds but are worth monitoring alongside technical indicators to gauge market sentiment,” noted Van Straten.
Historical data supports this view. Brief periods of negative funding rates have coincided with price bottoms during key market events, such as the Silicon Valley Bank collapse in 2023 and other downturns in 2024, each followed by significant price recoveries.
Implications for the Market
While negative funding rates can signal that bearish sentiment is overextended, they don’t always lead to immediate price reversals. Similarly, positive funding rates during bull markets may not indicate an overheated market but could simply reflect strong demand.
For now, Bitcoin remains in a delicate balance between bulls and bears, with funding rates offering a useful tool for traders to navigate these choppy waters. Whether Thursday’s dip marks the start of a broader recovery or a continuation of the current range will depend on how sentiment and market dynamics evolve in the coming weeks.
