Crypto derivatives funding rates drop to 3-year lows: A bullish sign?

Crypto derivatives funding rates have reached their lowest point since the 2022 bear market, driven by a massive liquidation of leveraged positions. Onchain analytics from Glassnode highlighted this severe leverage reset in the crypto market, indicating that speculative excess has been largely removed. Low funding rates typically suggest a surplus of short positions, signaling traders may expect further price declines. However, this severe short position accumulation can create potential for a 'short squeeze' if prices rebound. Currently, market sentiment shows 54% bullish sentiment among traders, with Bitcoin and Ether experiencing recent recoveries. The crypto market saw unprecedented liquidations, with a significant market cap drop coinciding with new tariffs announced by US leadership. This incident marked the largest leverage flush in crypto history, with losses totaling hundreds of billions, suggesting a reset phase for the market while positioning may turn more bullish as funding rates stabilize.

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