Following Sunday's market crash, Bitcoin's derivatives market flashed an important signal: perpetual funding rates briefly turned negative. This reflects a phase of aggressive deleveraging, where the balance of payments temporarily shifts in favor of longs, making it more expensive to hold shorts. In this context, negative funding indicates not a change in market regime, but rather a process of forced liquidation of over-leveraged positions.
The key point is that negative funding was short-lived, lasting only two days before returning to positive territory today. This means the positioning skew toward shorts did not persist, and the derivatives market has returned to a more neutral state.
Practically, this reads as follows: if funding turns positive and open interest rises simultaneously, it signals new longs entering the market and the formation of a directional move. However, if funding turns positive without OI expansion, it more likely indicates short covering and profit-taking rather than an influx of new aggressive demand.
Conclusion:
The brief dip into negative funding and its quick return to positive territory point to a localized leverage flush, not the formation of sustained bearish pressure. Until rising funding is confirmed by expanding open interest, the base case remains consolidation and range-bound price action. A directional impulse will only emerge with a synchronized increase in both Funding Rate and Open Interest.
