BlockBeats news, January 10, CoinDesk analyst James Van Straten said that when Bitcoin approaches $100,000, market sentiment usually turns bullish, and investors try to continue to drive the bull market. However, there is also the opposite situation. When Bitcoin approaches $90,000, such as Thursday, investors turn bearish.
Bitcoin's trend tends to move toward the maximum pain zone, and currently, this pain zone is the oscillation period between these two valuation ranges.
Bitcoin derivatives play a major role in these volatile price swings; while derivatives like futures and options only account for a few percentage points of the total market capitalization, they are becoming increasingly influential in the market.
One metric that traders closely watch is the futures perpetual funding rate. This is the average funding rate (as a percentage) set by exchanges for perpetual futures contracts. When the rate is positive, long positions regularly pay short positions; conversely, when the rate is negative, short positions regularly pay long positions.
During bull markets, Bitcoin tends to have a positive funding rate as traders believe prices will continue to rise, but when the market gets overheated, it usually loses momentum and prices begin to fall, leading to liquidations.
However, just as in bear markets, as price bottoms form gradually over time, prices can bounce back quickly, which causes traders to rush to close their positions. In these moments, local bottoms form.
According to yesterday’s data, the funding rate briefly turned negative at -0.001%, which is the first time this year and has only occurred a few times since November 2024. This led to leveraged liquidations and a shift in market sentiment, and the price of Bitcoin subsequently rose back above $94,000.
Negative funding rates do not always immediately lead to a price rally or bottom, but can be observed along with other price charting tools and technical indicators to form a market view. Negative funding rates may also signal a continuation of a bear market rather than an immediate bottom. Likewise, positive funding rates during a bull market may not mean the market is overheated, but rather reflect continued strong demand.
