Is the market really "fully bearish"? The truth revealed by funding rates may be just the opposite
As an analyst, I think the judgment of "fully bearish" needs to be taken with caution. The current funding rate leaning towards negative values does reflect short-term bearish sentiment, but this is more a reflection of the market's efficient pricing and strong arbitrage capabilities, rather than a long-term pessimistic signal.
The funding rate is essentially a market balancing mechanism. When perpetual contract prices are lower than spot prices, the funding rate is usually negative, and shorts need to pay longs, which not only suppresses excessive shorting but also provides opportunities for contrarian investors.
The current market structure is highly mature. A large amount of arbitrage capital (such as protocols like Ethena managing billions of dollars) quickly enters the market when rates deviate, making it difficult for rates to maintain extreme levels for long periods. This means that the current "bearish" state may be quickly corrected.
Negative funding rates have not been the norm historically. Data shows that for over 92% of the time, funding rates are positive, due to the built-in positive interest rate deviation of about 0.01% in the rate formula. Even if the market appears slightly bearish, rates tend to be slightly positive rather than deeply negative.
What really needs attention is whether negative rates can persist. If the market can quickly shake off deep negative values, it indicates strong underlying buying; conversely, if negative rates persist and deepen, it may signal a more severe bearish trend. The current slight negative value is more likely a brief technical correction.
The pendulum of market sentiment will not remain forever on the pessimistic end; the current structure of funding rates precisely leaves room for the next rebound.
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