Normally, a negative funding rate means more short positions are open than longs.
This often leads people to believe the price should go down — but that's not always the case.
And you might have observed a situation where the funding rate was negative, yet the coin pumped 400% — here’s why that could happen:"
1. Short Squeeze
When too many traders are short (betting on price falling), the market becomes heavily one-sided.
If the price starts to move slightly up — even a little — it forces short traders to close their positions (because they are losing money).
To close a short, they must buy back the asset, which pushes the price up even faster.
This triggers a chain reaction:
Shorts get liquidated.
Their forced buying drives the price even higher.
More liquidations happen.
This is called a short squeeze, and it can cause huge pumps even when the funding rate is negative.
2. Manipulation by Whales or Exchanges
Sometimes, whales (big players) or even market makers can manipulate the market:
They see many shorts open.
They deliberately pump the price with huge buying to liquidate small traders.
As shorts get wrecked, whales profit from the pain of retail traders.
3. Spot Market Demand
Funding rates only show futures market sentiment — not the spot market.
If suddenly big buying happens in the spot market (people buying real coins), it can drive the price up strongly, and futures traders are forced to react.