Analysis of Bitcoin’s derivatives market shows a prolonged period of extreme bearish sentiment, with funding rates deeply negative. Historical data suggests such periods of persistent negative funding have often preceded significant price rallies for BTC, with past instances yielding median 90-day gains exceeding 43%.
Bitcoin’s derivatives market has reached a state of extreme pessimism, according to analyst Jamie Coutts. His data shows the 7-day moving average funding rate has fallen to the third percentile of all readings since 2020.
The analyst examined 14 periods since 2016 with at least 20 days of negative funding. He revealed that after these periods ended, the average 30-day return was 20.8%, with 12 of 14 cases positive. Median 90-day returns reached 43.5%, with 11 of 14 periods finishing positively.
Comparable situations occurred during the 2018-2019 crypto winter, the 2020 COVID crash, and after China’s 2021 Bitcoin mining ban. Following those episodes, which involved no less than 48 days of negative funding, BTC saw substantial gains, including a 73.4% return after 90 days in 2018-2019.
The recent negative funding stretch from February to March lasted 50 days, making it the third-longest such period. Coutts noted his analysis is based on a “thin dataset” and that two exceptions in early 2018 resulted in losses. He stated, “The signal doesn’t distinguish between a bull market correction and a structural bear market.”
This assessment comes as Bitcoin trades near $71,000, well below its all-time high. Another market watcher, Darkfost, said nearly $1 billion in sell volume hit Binance derivatives after a geopolitical statement, pushing funding rates further negative. Darkfost argued that when a strong consensus forms on the short side, markets often move opposite.
