Analyst: Highly negative funding rates point to BTC bounce

Perpetual funding rates have turned negative on the major exchanges, indicating that short sellers are paying to maintain bearish positions.

Bitcoin perpetual funding rates on major exchanges have turned negative, indicating that short sellers are now dominating the derivatives market and paying to keep their positions open.

While negative financing typically reflects bearish sentiment, one analyst interprets the current extreme as a potential trigger for a short squeeze, arguing that excessive short positioning often precedes sharp upside reversals rather than sustained downtrend.

Funding turns negative as shorts flood the market

In a February 27 market update, analyst Amr Taha said noted that funding rates on the major derivatives platforms turned negative at the same time, with Binance at -0.005%, OKX at -0.007% and Bybit at -0.011%.

Financing rates are periodic payments between long and short traders in perpetual futures, and when they go negative it means short sellers are paying longs, reflecting dominant bearish positioning.

Taha also pointed to data from the BTC liquidation heat map that shows dense clusters of leveraged positions above the current price, many originating around the $92,000 level. According to the analyst, these short positions could be forced to close if Bitcoin moves higher, accelerating upside volatility.

“If macroeconomic conditions improve, the likelihood of a renewed price pump increases in the short to medium term,” Taha wrote.

They added that historically, a large short position combined with negative financing has often foreshadowed sharp reversals, although the measure alone cannot predict direction.

Meanwhile, retail activity is also increasing. Nino, a contributor to CryptoQuant, indicated that trading frequency among smaller investors has increased compared to the annual average, a sign that individual participants are returning to the market after weeks of caution.

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“The current spike underlines a growing sense of anticipation for the next major market expansion,” the analyst explains.

Whale flows and market structure

In a separate post, Taha followed approximately 1,700 BTC in positive net inflows from so-called “Octopus” portfolios, representing medium-term holders, to Binance. A larger inflow of 5,000 BTC from the same cohort on February 2 preceded a decline above $77,500.

This time, while the move is positive, it is significantly less aggressive, indicating that it may not convey the same bearish power.

“Of course, the market reaction also depends on liquidity conditions and broader positioning,” Taha said. “But strictly speaking from the map data, the intensity is lower.”

Bitcoin briefly tested $70,000 on February 26, but failed to hold that threshold, settling within a range between $66,600 and $68,600 over the past 24 hours, according to CoinGecko data, with observers at Glassnode saying the BTC market has yet to recover despite relative stabilization.

At the time of writing, the flagship cryptocurrency was trading nearly $200 below the $68,000 level, down slightly by 0.4% in the past 24 hours and showing no change for seven days. However, on a 30-day basis, the asset is down nearly 24%, and also about 46% below its all-time high in October 2025.