TLDR:

• Ethereum absorbed $1.1 billion in liquidations as total crypto market lost $470 billion over three days. 
• Binance ETH funding rates dropped to -0.028%, levels last seen during the FTX collapse in November 2022. 
• Aggregated funding rates across exchanges hit -0.078%, signaling extreme bearish positioning in derivatives. 
• Market remains in cleansing phase as geopolitical tensions and tight liquidity prevent immediate recovery signals.

Ethereum funding rates plunmet to levels not seen since the FTX collapse as geopolitical tensions between the United States and Iran trigger massive liquidations.

Total crypto market capitalization shed nearly $300 billion in one session, with cumulative losses reaching $470 billion over three days.

More than $2.5 billion in positions were wiped out across derivatives markets, creating severe imbalances between perpetual and spot markets.

Mass Liquidations Create Historic Market Imbalance

The crypto market faced intense selling pressure today as escalating tensions between the United States and Iran sparked risk-off sentiment.

Digital assets absorbed significant losses alongside other risk assets in global markets. Ethereum bore the brunt of the damage in the derivatives space, with roughly $1.1 billion in positions liquidated.

These forced closures created a sharp divergence between perpetual and spot markets for Ethereum. Perpetual prices disconnected to the downside relative to spot trading, revealing excessive selling in derivatives contracts. Market makers responded by pushing funding rates into deeply negative territory to restore balance.

Binance recorded ETH funding rates dropping to -0.028%, marking one of the most extreme readings in the platform’s history. Such levels typically emerge only during periods of acute market stress and systemic fear.

The last comparable instance occurred during the FTX collapse in November 2022, when panic gripped markets and forced mass deleveraging.

Aggregated funding rates across major exchanges fell even further to -0.078%, according to data shared by @Darkfost_Coc.

This metric captures the broader market sentiment and confirms the severity of current conditions. The negative rates indicate short positions must pay longs, reflecting overwhelming bearish positioning in futures markets.

Funding Rate Extremes Signal Market Cleansing Phase

Negative funding rates at these levels typically point to excessive pessimism among derivatives traders. However, extreme readings alone do not guarantee an immediate market reversal or recovery. Current geopolitical uncertainties continue to weigh on risk appetite across all asset classes.

Liquidity conditions remain tight as market participants reduce exposure and wait for clarity. The combination of constrained liquidity and ongoing tensions suggests further volatility could emerge. Traders appear positioned for additional downside, as evidenced by the funding rate structure.

The market is currently undergoing what analysts describe as a cleansing phase rather than a rebuilding phase. Overleveraged positions are being flushed out of the system through forced liquidations. This process typically needs to run its course before sustainable recovery can begin.

While historical precedent shows that extreme negative funding rates can mark capitulation points, timing remains uncertain. The FTX-era comparison provides context but different fundamental factors drive current price action.

Geopolitical risks rather than exchange insolvency concerns dominate the narrative this time. Market participants must weigh whether derivatives positioning has reached sufficient extremes to absorb additional selling pressure or if more downside lies ahead.