Analyzing the recent behavior of funding rates offers critical insights into the sentiment driving Bitcoin’s price action. During the prolonged correction from March to October 2024, Bitcoin’s funding rates turned negative repeatedly, even during short-lived rallies.
This trend revealed an aggressive presence of short-sellers and a clear lack of confidence among market participants, likely driven by retail traders engaging in distribution or attempting to hedge downside risk.
Now, we’re seeing a strikingly similar pattern. As Bitcoin recently rallied and approached the critical $95K resistance zone, the funding rates once again flipped negative. This divergence between rising prices and falling funding rates suggests that a significant portion of the market is either:
- Hedging against potential downside risk, anticipating a bearish reversal at resistance,
- Or engaging in distribution, selling into strength to manage exposure.
This behavioral pattern often precedes short-term pullbacks, as excessive caution or contrarian positioning can temporarily shift the demand-supply balance. Given this backdrop, a short-term bearish retracement appears likely.
If historical patterns hold true, this retracement could ultimately be healthy for the broader bullish structure.
Written by ShayanBTC
