Bitcoin Funding Rate Indicates Local Bottom, But Liquidity Paints A Grim Picture

• A technical analyst says Bitcoin has already touched its local bottom, as the funding rate flipped negative when its price rallied above $71K.
• However, a senior executive from a private crypto exchange warns that BTC’s thin liquidity does not paint a bullish reversal.

Bitcoin (BTC) staged a significant rally at the start of the week, bringing the top market-cap altcoins along for the ride. On Monday, the prime crypto asset’s daily candle rose to nearly $75,000, reclaiming the price it had lost since early February 2026.

Bitcoin Funding Rate Flips to Negative

According to Ali Martinez, a technical analyst, the Bitcoin funding rate has flipped to -0.004% when it traded near $71,000. This means that short sellers were paying a premium to longs to keep their bearish bets open.

However, the analyst noted that the retail crowd mainly maintained those short positions. Contrary to this trend, the smart money or capital flowing from institutional investors and hedge funds is on the lookout for the inevitable short squeeze.

Over the last three years, such a switch to a negative funding rate pattern has preceded every major relief rally. The “peak fear reset,” as Martinez has called it, suggests the local bottom is usually in, as people are starting to pay to keep their short positions.

From December 2022 to June 2025, similar scenarios have led to a 17% rally, or as much as 176%. The latter occurred when BTC shot up from $26,400 to $73,000 in August 2023.

Liquidity Poses a Stark Warning

On the other hand, Anton Golub, Chief Business Officer of FreedX, warned that Bitcoin’s liquidity does not indicate a bullish reversal. He explained that BTC has fallen by -50% from around $125,000 to $62,000 since October last year. With that in mind, bear markets typically take 3 to 6 months to find a bottom, and it only happens after the market has collapsed.

Between those periods, the Web3 and crypto expert highlighted that the assets under management (AUM) of spot Bitcoin exchange-traded funds (ETFs) were approximately $165 billion. The figures are a far cry from the current $95 billion.

Golub said the metrics hint retail investors are not yet jumping on the bandwagon. Meanwhile, institutional investors will need time to allocate capital into Bitcoin.

Additionally, Golub explained that Strategy’s persistent BTC purchases, which dangerously bring its Market-to-Net Asset Value (mNAV) into a discount, pose an extra sell-pressure risk, as retail will likely lose money on its “Ponzi-like product” STRC.

What’s more, the Freedx senior executive claimed “crypto VC (Venture Capital) is dead.” He believes they won’t deploy capital soon, as the altcoin season never arrived, and losses have significantly dampened their sentiment.

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