Bitcoin Funding Rate Turns Negative at -2% Amid Market Uncertainty

Bitcoin's perpetual futures funding rate has been oscillating between positive and negative values, indicating a high degree of market uncertainty. As the price of bitcoin hovers around $80,000, traders are struggling to find a clear direction, especially after the cryptocurrency lost its 200-day moving average.

The funding rate, which is set by exchanges for perpetual futures contracts, determines the periodic payments between long and short positions. A positive rate means that long positions pay shorts, while a negative rate means that shorts pay longs. This fluctuation in the funding rate reflects the indecision among traders, as they try to gauge the market's next move.

Over the past two weeks, the funding rate has swung between positive and negative values, a pattern that is atypical for bull markets, where the rate typically remains positive. Recently, the daily funding rate hit a negative -0.006%, equivalent to an annualized rate of -2%. This negative funding rate suggests that there is bearish sentiment in the market, as shorts are paying longs.

Historically, bitcoin bottoms have coincided with sustained negative funding rates, which typically coincide with bearish sentiment. Examples include the Covid-19 crash, the FTX collapse, and the 2021 mining ban. However, over the past two weeks, each bitcoin rally has prompted traders to shift positions, resulting in long liquidations when the price reverses. This has prevented a sustained period of negative funding rates, as traders are quick to adjust their positions in response to price movements.