On January 10, CoinDesk analyst James Van Straten stated that when Bitcoin approaches $100,000, market sentiment typically turns bullish, with investors trying to continue pushing the bull market. However, the opposite can also occur; for instance, when Bitcoin approaches $90,000, as it did on Thursday, investors turn bearish. Bitcoin's price movement often gravitates towards the area of maximum pain, which currently appears to be the oscillation period between these two valuation ranges. Bitcoin derivatives play a significant role in these volatile price swings; derivatives like futures and options, although only accounting for a few percentage points of the total market value, are becoming increasingly influential in the market. One indicator that traders closely monitor is the perpetual funding rate for futures. This is the average funding rate (expressed as a percentage) set by exchanges for perpetual futures contracts. When the rate is positive, long positions regularly pay fees to short positions; conversely, when the rate is negative, short positions regularly pay fees to long positions. During a bull market, Bitcoin tends to have a positive funding rate, as traders believe prices will continue to rise, but when the market overheats, it often loses momentum, causing prices to start falling and leading to a liquidation wave. However, the same can occur in a bear market, as price bottoms gradually form over time, and prices can rebound quickly, prompting traders to rush to close their positions. At these moments, local bottoms can form. According to data from yesterday, the funding rate briefly turned negative at -0.001%, marking the first occurrence this year, and it has only happened a few times since November 2024. This led to leveraged liquidations and a shift in market sentiment, after which Bitcoin's price rebounded above $94,000. A negative funding rate does not always immediately lead to a price rebound or the formation of a bottom, but it can be observed alongside other price chart tools and technical indicators to form a market perspective. A negative funding rate may also signal a continuation of the bear market rather than an immediate bottom. Similarly, a positive funding rate during a bull market may not indicate an overheated market but rather reflect sustained strong demand.

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