As Bitcoin (BTC) approaches the $75,000 mark, the perpetual swap market is flashing an unusual signal. CoinDesk analyst James Van Straten reports that the 7-day moving average funding rate has fallen to approximately -0.005%, the most negative level since 2023. A negative funding rate means short traders are paying longs, indicating heavy short positioning. Yet Bitcoin has not crashed as bears anticipated; instead, it has grinded higher from $60,000 to near $75,000, creating a stark divergence between price and sentiment.
Historical Pattern: Extreme Negative Funding = Local Bottoms
Van Straten, citing Glassnode data, points out that deeply negative funding rates have repeatedly coincided with Bitcoin local bottoms. Notable examples include the March 2020 COVID-19 crash — BTC fell to $3,000, funding turned deeply negative, then a bull run began; the 2021 China mining crackdown — price dropped to $30,000, funding extremely bearish, followed by new all-time highs; the November 2022 FTX collapse — BTC bottomed near $15,000 with extreme negative funding; and the March 2023 Silicon Valley Bank crisis — funding flipped negative, BTC briefly dipped below $20,000 then quickly recovered. More recent validations include the August 2024 yen carry trade unwind and the April 2025 selloff, where extreme negative funding marked local lows.
Can Shorts Keep the Rally Alive?
Van Straten notes that the persistence of negative funding indicates bearish positioning remains elevated even as price moves higher. This divergence suggests the market is “climbing a wall of worry.” Once shorts are forced to cover, a short squeeze could ignite further upside. The oversized short positions may well become fuel for the next leg up.