Negative Bitcoin Funding Rate May Signal Pending Short-Squeeze Above $70K

Bitcoin's price has remained within a broader downtrend despite a slight recovery from a local low of $65,600 to $67,824.54. A breakout above $72,000 is seen as a key reversal signal for a potential bullish shift. Open interest in derivatives markets has increased to $15.8 billion, indicating stabilizing leverage and retail sentiment rebounding.

The U.S. Supreme Court recently ruled the Trump-era IEEPA tariffs illegal, potentially leading to refunds that could stimulate short-term economic growth. According to analysis, the ruling will likely be handled by lower courts, with refunds expected to amount to about half of the total tariffs collected.

Bitcoin and Ethereum showed resilience in the face of ongoing market turbulence, with ETF outflows worsening further. The Fear & Greed Index reached an extreme fear level of 5, highlighting deteriorating sentiment across the market.

Why Did This Happen?

Bitcoin's derivatives market is experiencing a risk-off mood, with open interest dropping to $44 billion from a peak of over $94 billion in October 2025. The decline in open interest indicates traders are stepping back from speculative bets. Experts attribute this risk-off sentiment to a weaker U.S. dollar, geopolitical tensions, and AI-related risks to traditional tech models.

A recent jobs report showing 130,000 new U.S. jobs added in January has dented expectations for further rate cuts. This triggered large-scale institutional selling in the cryptocurrency market.

How Did Markets React?

Bitcoin fell 1.73% in the last 24 hours to $67,544, while Ethereum slipped 0.42%. ETF outflows continued to worsen, with BTC spot ETFs recording a $315.86M net outflow and ETH spot ETFs seeing $123.37M in outflows according to data.

Despite the broader downturn, altcoins outperformed Bitcoin during the consolidation phase. WLFI rose 12.2% due to a partnership with Securitize and DarGlobal and a USD1 stablecoin pilot with Apex Group as reported.

What Are Analysts Watching Next?

The U.S. inflation reading in January briefly lifted Bitcoin above $70,000, as short sellers were forced to unwind positions in perpetual futures markets. This rally was driven by short covering and spot demand rather than new leveraged bets.

Bitcoin has struggled to regain a solid foothold above $70,000 for nearly two weeks. This has led to a loss of investor confidence across traditional equities, particularly tech stocks.

The three-month annualized basis for Bitcoin remains strong at 3%, indicating institutional conviction in the market. Derivatives positioning shows stabilizing leverage, while options sentiment has shifted in favor of call options over put options in the last 24 hours according to analysis.

The U.S. market is also preparing for 24/7 crypto derivatives trading by CME and MARA's acquisition of AI data center firm Exaion as reported. These developments may provide new momentum for the market as traditional financial markets adapt to evolving digital asset trading norms.