Following a recent rally that prompted many traders to pay higher than usual fees to maintain long positions, the funding rate for Bitcoin (BTC), the largest cryptocurrency by market value, has begun to return to normal levels. This shift suggests a potential overall market upswing led by Bitcoin.
Data from Coinglass indicates that over the past week, traders paid funding rates between 0.19% and 0.93% to stay long on Bitcoin. For certain altcoins like ORDI, rates soared as high as 4.6%. Major altcoins, including Ethereum (ETH), Solana (SOL), and XRP (XRP), have also seen their previously high funding rates normalize.
The current situation reveals a change in market participants’ behavior, with many now positioning for a potential downturn rather than an uptrend. Funding rates in the crypto futures market have flattened, and approximately 24 million in cumulative liquidations have been recorded in the last 138 hours.
Funding rates are periodic payments between short and long positions aimed at keeping the future price of an asset close to its spot price. A perpetual futures contract allows buying or selling an asset at a predetermined price with no expiration date, making the funding rate a significant indicator of traders’ sentiment and market trends.
A negative funding rate indicates a majority of traders are in short positions, anticipating a market decline, while a positive rate suggests a majority are in long positions, expecting a rise. Current data shows funding rates dropping below zero, indicating that most traders expect Bitcoin’s price to fall.
Despite the recent downturn, analysts remain optimistic about Bitcoin’s continued upward trajectory. Prominent crypto analysts, including Credible Crypto and Crypto Ed, have expressed positive outlooks, suggesting that Bitcoin’s bullish journey is far from over.