Analyst: BTC funding rate briefly turns negative, typically a signal of "local bottom"

BlockBeats news, on January 10th, CoinDesk analyst James Van Straten said that when BTC approaches $100,000, market sentiment usually turns bullish, with investors trying to continue pushing the Bull Market. However, the opposite can also happen, when BTC approaches $90,000, for example on Thursday, investors turn bearish. The trend of BTC often moves towards the area of maximum pain, and currently, this area of pain is the period of fluctuation between these two valuation ranges. Derivatives of BTC play an important role in these price fluctuations; derivatives such as futures and options, although only accounting for a few percentage points of the total market capitalization, are becoming increasingly influential in the market. One indicator closely followed by traders is the perpetual funding rate of futures. This is the average funding rate set by exchanges for perpetual futures contracts (calculated as a percentage). When the rate is positive, long positions regularly pay fees to short positions; conversely, when the rate is negative, short positions regularly pay fees to long positions. During a Bull Market, BTC often has a positive funding rate because traders believe the price will continue to pump, but when the market overheats, it usually loses momentum, and prices start to fall, leading to a liquidation wave. However, the same is true in a Bear Market, as the price bottom gradually forms over time, the price can quickly rebound, causing traders to be eager to close positions. At these times, local bottoms are formed. According to yesterday’s data, the funding rate briefly turned negative to -0.001%, this is the first time this year and has only occurred a few times since November 2024. This led to leveraged liquidations and a shift in market sentiment, with the BTC price subsequently rising above $94,000. A negative funding rate does not always immediately lead to a price rebound or bottom formation, but can be observed together with other price chart tools and technical indicators to form a market view. A negative funding rate may also indicate the continuation of a Bear Market rather than an immediate bottom. Similarly, a positive funding rate during a Bull Market may not necessarily mean the market is overheated, but rather reflects sustained strong demand.