Bitcoin funding rate bearishness reached extreme levels on March 9 as the 30-day funding rate percentile dropped to 6%, the lowest level since early 2023, according to CryptoQuant data.
The reading indicates that only 6% of funding rate observations in the past month were lower than today’s level, signaling heavy short positioning in Bitcoin perpetual futures markets.
Cryptoquant contributor RugaResearch noted that negative funding rates have been observed for most of the past two weeks, additional evidence that bearish sentiment is still strong in the Bitcoin derivatives markets.
The 30-day percentile comparison between the current funding rate and the past month’s funding readings determines relative market positioning.
As the 30-day percentile fell to its current level of 6%, it shows that all funding readings taken in the past month have been higher than today’s funding level. This further confirms that short positions now dominate the derivatives markets.
According to the insight from CryptoQuant, funding rates changed sharply at the beginning of this year. In January, the daily average funding rates were about +0.005%.
Long traders were then required to pay shorts during this time of domination of bullish sentiment. However, the market situation changed quickly in February.
Source: CryptoQuant
The average daily funding rates in February were about -0.003%, while the average daily funding rates in March are about -0.004%. Both of these show how much bearish pressure has been building in the derivatives markets.
The report also stated that 25 of the past 30 days have seen negative funding. This provides evidence that traders have consistently favored short positions over this period.
Some of the most extremely negative reading values occurred on February 6th, February 25th, February 28th, and March 4th, when funding rates dropped to less than -0.01%. These extremely negative funding levels signified aggressive bearish leverage across major exchanges.
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While extremely compressed funding ratios indicate very strong bearish sentiment, they do not necessarily predict the imminent price movement direction. Historically, extreme positioning in derivatives markets has sometimes led to rapid price moves or even short squeezes when market sentiment becomes too one-sided.
CryptoQuant’s analysis also notes that the last time funding percentiles reached similarly low levels was in early 2023. Therefore, the current reading is one of the lowest in almost three years for Bitcoin.
As such, the current derivatives setup in Bitcoin can either reinforce deeper corrections or set the stage for a rapid price rebound if short positions begin to unwind.
Extremely bearish positioning in derivatives can increase the possibility of sudden price volatility or short squeezes in the Bitcoin market.
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