Bitcoin perpetual futures reflect market pessimism as funding rates stay below neutral: K33 Research

The bitcoin perpetual futures market is showing considerable pessimism, with funding rates remaining below neutral for an extended period — similar to the significant price drop the digital asset experienced in November 2022 — according to an analyst.

"We’re in the deepest funding rate environment since bitcoin’s 80% drawdown in November 2022," K33 Research analyst Vetle Lunde said. However, Lunde added that these hedges or direct short-biased bets are getting crowded, and that "this is a solid indicator of nearing sell-side exhaustion."

In this week's K33 Research report, Lunde pointed out that the funding rate for bitcoin perpetual futures has been below neutral for more than 30 days in a row — marking the longest stretch since a similar 36-day period back in May 2024. The K33 Research analyst added that while the May 2024 period saw negative funding rates for a longer time, the current rates are even lower and have remained consistently below neutral for the past month.

"While the May streak lasted longer, annualized funding rates during that period averaged at 5.1%, substantially higher than the current regime, the average four-week funding rates now sit at negative levels for the first time since December 25, 2022," Lunde said. When the bitcoin perpetual futures funding rate is negative, it means traders are mostly betting on the price of the asset going down.

However, the K33 Research analyst noted that if the market follows seasonal trends, September offers opportunities to buy a dip before a possible recovery in the fourth quarter of the year. "Buying blood in September to build exposure for Q4 has historically been the best spot strategy," Lunde added.

The price of bitcoin increased by over 4% in the past 24 hours to trade at $56,462 at 7:09 a.m. ET. Bitcoin dominance is at 53.9%, and ether dominance is at 13.9%, according to CoinGecko data.