Data shows that Bitcoin funding rates have recently turned negative across various exchanges, indicating that bearish bets are now dominating.

Cumulative Bitcoin funding rates have dropped

As noted by the analytical company Santiment in a up-to-date edition post on X, aggregate Bitcoin funding rates are currently showing a significant brief bias. The “funding rate” here refers to a metric that tracks the amount of periodic fees that derivatives traders exchange among themselves on a given centralized exchange.

When the value of this indicator is positive, it means that holders of long contracts are paying a premium to holders of brief contracts to maintain their position. Such a trend may be a sign that bullish sentiment is dominating the platform. On the other hand, a ratio that is below zero means that most traders may have a bearish mentality because brief positions are outperforming long positions in the stock market.

Here is a chart provided by Santiment that shows the trend of aggregate Bitcoin funding rates across all exchanges:

As shown in the chart above, Bitcoin funding rates on various exchanges have recently seen a noticeable negative boost, which means that the demand for brief positions has increased. “Traders are showing clear concern over fears of an escalation of the war, as well as expressing frustration with the lack of progress on the Transparency Act,” the analyst firm noted.

An boost in bearish sentiment may not actually be bad for the cryptocurrency, but if history is anything to go by, the asset’s price often goes against the grain of the crowd.

When it comes to the derivatives market, this countervailing effect can occur as a result of liquidations that trigger the opposite type of price movement. “Historically, extreme shorting increases the likelihood of crypto rebounds due to potential short squeezes that provided momentum when prices break through resistance levels,” Santiment explained.

While either side of the market can fall victim to a liquidation depending on random volatility, the more dominant side is usually the one that is more vulnerable to a massive cascade. For Bitcoin, this side is currently shorter. Time will tell how these assets will perform in the coming days given the bearish sentiment.

BTC price

The effects of negative funding rates may already be evident as the asset has rebounded above the $70,000 level in the last day.

The upward move resulted in more than $100 million in brief liquidations, according to the heat map CoinGlass suggests.