Crypto Market Enters Bearish Regime: Funding Rates, Derivatives, and Sentiment Signal Widespread Pessimism

The crypto market has entered a pronounced bearish phase in November 2025, marked by sharp declines in major assets, deteriorating on-chain metrics, and derivatives-driven sentiment shifts. Bitcoin (BTC-USD) plummeted 23% month-to-date, Ethereum (ETH-USD) fell 27%, and Solana (SOL-USD) dropped 31%, reflecting systemic weakness across the ecosystem. These moves, concentrated during U.S. trading hours, underscored a fragile market structure exacerbated by macroeconomic uncertainties and evolving derivative dynamics.

Funding Rates: A Barometer of Market Imbalance

Perpetual futures funding rates-a critical gauge of directional risk-have collapsed to 3.8%, the lowest since October 2023. This metric, which reflects the premium paid by longs to shorts in leveraged trading, has historically signaled market bottoms when turning negative. In November 2025, negative funding rates emerged as short-sellers gained dominance, indicating a structural shift toward bearish positioning. According to a report by VanEck, this inversion aligns with prior market troughs, such as the Lido ETH de-peg event in June 2022. However, unlike past cycles, the current funding rate compression coincides with a broader macroeconomic malaise, including Fed policy ambiguity and concerns over AI-driven inflation and quantum computing risks to Bitcoin's security.

Derivatives Data: Open Interest and Short-Squeeze Risks

Bitcoin's open interest (OI) has contracted to $29 billion, the lowest level since April 2025, signaling reduced speculative activity. This decline, coupled with a 37% drop in blockchain revenues and a 26% monthly fall in decentralized exchange (DEX) volumes, highlights a liquidity crunch. Yet, derivatives data also reveals a potential inflection point. Bitcoin faces a critical resistance level at $87,000, where large bearish positions risk liquidation, creating a short-squeeze scenario. Analysts at Yahoo Finance note that a break above this threshold could force a temporary rebound, though the sustainability of such a move remains contingent on broader market sentiment.

Sentiment and On-Chain Metrics: A Deepening Pessimism

On-chain indicators further corroborate the bearish narrative. The percentage of Bitcoin supply in profit has fallen to 55%, the lowest since September 2023, while long-term holders (LTHs)-particularly those with seven-year+ positions-have begun selling. This exodus from LTHs, typically a sign of capitulation, suggests a loss of confidence in Bitcoin's near-term value proposition. Meanwhile, Ethereum's declining hash rate and Solana's network congestion issues have amplified fears of a prolonged downturn.

Strategic Implications for Near-Term Positioning

The market is now trading in a defensive range between $81,000 and $91,000 for Bitcoin, with support levels under intense scrutiny. Investors must weigh the risks of further corrections against potential short-term rebounds. For derivatives traders, the negative funding rates and compressed OI suggest caution: leveraged longs face heightened liquidation risks, while shorts may find temporary respite if the $87,000 level holds. However, the absence of a clear catalyst for a bullish reversal-such as Fed rate cuts or institutional inflows-means the bearish regime is likely to persist until Q1 2026.

Conclusion

The November 2025 selloff has created a derivatives-driven feedback loop, where collapsing funding rates, shrinking open interest, and profit-taking by long-term holders reinforce bearish momentum. While short-term technicals hint at possible volatility around $87,000, the broader macroeconomic environment remains a headwind. Investors should prioritize risk management, hedging against further downside while monitoring on-chain flows for early signs of capitulation or reversal.