Bitcoin funding rates recover after May trough

The Bitcoin futures market is showing a striking recovery pattern. Since late May, funding rates on Binance have risen step by step from an extremely bearish level, a signal that analyst Darkfost considers worth keeping an eye on. The Bitcoin price currently stands at $77.700, an increase of 0.5% over the past 24 hours.

Bitcoin is available at OKX and Bybit.

In brief:

• The 30-day sum of Bitcoin funding rates on Binance is recovering after one of the most bearish periods ever measured.
• A build-up of short positions followed a 52% price drop, after which the May rally got under way.
• According to Darkfost, the same pattern is now playing out again, but a further rise also requires inflow from the spot market.

Funding rates reach a historic low in sentiment

Darkfost analyses the funding rates as a monthly sum rather than day by day, because this gives a better picture of the underlying trend. The daily fluctuations normally make this metric difficult to interpret.

What stands out in the chart is that funding rates earlier this year reached one of the most negative levels ever recorded on Binance. That happened after a 52% price drop, as more and more traders took short positions. That build-up of shorts ultimately acted as fuel for the May rally: as soon as the price began to rise, many of those positions were forcibly closed.

The historical data in the chart show that strongly negative funding rates coincided several times with the end of a correction phase, followed by a gradual recovery in market sentiment.

Recovery pattern may repeat itself

Darkfost argues that the current recovery in funding rates matches earlier periods in which optimism slowly returned after a low point in sentiment. The Bitcoin price is currently moving around $77.000, a level that has previously acted as resistance.

According to the analyst, this pattern is encouraging in itself, but not enough to guarantee a breakout from the correction phase. He points out that spot inflow is needed to genuinely reinforce the move. Without concrete demand from the spot market, the recovery in the futures market remains limited to sentiment.

Bitcoin’s long-term holders remain on the sidelines, despite the recent price rise. That makes the question of whether the spot market will follow the recovery in the derivatives market all the more relevant for the coming weeks.