Binance Funding Rates decreased due to increased short positions, even though Bitcoin's price remained stable above $100,000.
Weak on-chain activity alongside strong valuation metrics creates warning signs about the potential for price correction. This discrepancy increases market risk ahead of upcoming volatility.
MAIN CONTENT
Negative Binance Funding Rates indicate significant short pressure, potentially leading to a short squeeze.
Bitcoin's on-chain activity has sharply declined, reflecting the caution of users and new investors.
Valuation metrics like Stock-to-Flow and NVT Ratio being high may indicate that Bitcoin is overvalued relative to actual network usage.
Why are Bitcoin Funding Rates decreasing while the price remains stable?
According to a CryptoQuant analysis in July 2025, Binance Funding Rates turned negative even though Bitcoin continuously maintained above $100,000, reflecting an increasing short position opening. This is a sign that investors expect a short-term price correction.
However, history shows that when Funding Rates turn negative while the price remains stable, it is very easy for a short squeeze to occur, causing massive liquidations of short sellers, pushing the price up even more. Traders need to be aware of this imbalance to seize opportunities or hedge risks.
"The decline in Funding Rates while Bitcoin's price remains stable is a sign that the market is over-accumulating short positions; a short squeeze could occur if sellers cannot control the momentum."
Michael van de Poppe, cryptocurrency market analyst, July 2025
Why has Bitcoin's on-chain activity decreased sharply?
Data from Santiment shows that the number of transactions in the Bitcoin network dropped to 50.3 thousand, and network growth decreased to 57.6 thousand – both are the lowest levels in months. This indicates a decline in user participation.
The reason could be that individual investors are cautious at high prices, or many users are observing from the sidelines and not participating in trades. If this decline lasts, it will negatively impact network health and the ability to sustain market momentum.
Is Bitcoin being inflated in terms of scarcity?
According to a Santiment report, Bitcoin's Stock-to-Flow (S2F) ratio skyrocketed to 458 in July 2025, far exceeding the average during the previous period. This is a metric that assesses scarcity based on current supply and annual new production.
Although this metric motivates long-term investors, simultaneous increases with a decline in network activity may exaggerate the scarcity narrative, causing an imbalance between price expectations and actual usage.
Which metric can you use to identify if Bitcoin is overvalued?
The NVT Ratio with Circulation has risen to 1.527 – the highest level in over a year, reflecting that Bitcoin's market value is rising much faster than the actual trading volume on the network.
The surge in NVT alongside declining trading activity and user growth suggests that Bitcoin may be overvalued by the market. Based on experiences from previous bull runs, a high NVT often signals local price peaks and the likelihood of subsequent strong corrections.
Is outflow from exchanges a sign of upcoming volatility?
Data from CoinGlass on July 7, 2025, shows a net outflow of over $30 million from exchanges, indicating that investors still maintain confidence and limit selling, prioritizing storing cryptocurrency in personal wallets.
This is a positive sign psychologically but also creates a contradiction when network strength has not recovered. Without a flow of new users participating, the market may lack the momentum to maintain a sustainable upward trend, leading to more volatility.
"Outflows from exchanges are evidence that investors want to hold assets long-term, but on-chain and valuation metrics need to improve to support a stable upward trend."
Laurent Kssis, CEO CoinGlass, July 2025
Summary and warning for investors
Negative Funding Rates and outflows from exchanges support a short-term bull market scenario due to the potential for a short squeeze. However, the sharp decline in on-chain activity, along with high Stock-to-Flow and NVT Ratio metrics, creates the risk of correction.
Investors need to closely monitor signs of network and market volatility to make timely decisions and avoid risks from potential instability.
Frequently Asked Questions
What does negative Funding Rates mean? Negative Funding Rates indicate that the party opening short positions pays fees to the long side, reflecting high selling pressure in the market.
How does reduced on-chain activity affect Bitcoin? A decrease in transactions and new users often signals caution and may weaken Bitcoin's upward momentum.
Is the Stock-to-Flow Ratio important? This is a metric that assesses scarcity, helping long-term investors value Bitcoin, but it should not be viewed as the only factor.
What does a high NVT Ratio indicate? A high NVT ratio means that the market value is not supported proportionately by actual trading activity, increasing the risk of a bubble.
Is outflow from exchanges always a good sign? Outflows indicate long-term confidence, but if not accompanied by network strength, the upward trend may not be sustained.
Source: https://tintucbitcoin.com/bitcoin-giam-nguoi-dung-canh-bao-tang-100k/
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