Perpetual funding rates have turned negative across major exchanges, signaling that short sellers are paying to maintain bearish positions.

Bitcoin perpetual funding rates on major exchanges have flipped negative, signaling that short sellers now dominate the derivatives market and are paying to keep their positions open.

While negative funding typically reflects bearish sentiment, one analyst is interpreting the current extreme as a potential setup for a short squeeze, arguing that excessive short positioning often precedes sharp upside reversals rather than continued downside.

Funding Flips Negative as Shorts Crowd the Market

In a February 27 market update, analyst Amr Taha noted that funding rates across major derivatives venues simultaneously moved into negative territory, with Binance at -0.005%, OKX at -0.007%, and Bybit at -0.011%.

Funding rates are periodic payments between long and short traders in perpetual futures, and when they turn negative, it means short sellers are paying longs, reflecting dominant bearish positioning.

Taha also pointed to data from the BTC liquidation heat map showing dense clusters of leveraged positions above the current price, many originating around the $92,000 level. According to the analyst, if Bitcoin pushes higher, those short positions could be forced to close, accelerating upside volatility.

“If macroeconomic conditions improve, the probability of a renewed price pump in the short to medium term increases,” Taha wrote.

They added that historically, heavy short exposure combined with negative funding has often foreshadowed sharp reversals, though the metric alone does not predict direction.

Meanwhile, retail activity is also ticking up. Nino, a CryptoQuant contributor, indicated that trading frequency among smaller investors has spiked relative to its one-year average, a sign that individual participants are re-entering the market after weeks of caution.

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“The current spike underscores a growing sense of anticipation for the next major market expansion,” explained the analyst.

Whale Flows and Market Structure

In a separate post, Taha tracked roughly 1,700 BTC in positive net inflows from so-called “Octopus” wallets, representing medium-term holders, into Binance. A larger 5,000 BTC inflow from the same cohort on February 2 preceded a drop from above $77,500.

This time, the movement, while positive, is significantly less aggressive, suggesting it may not carry the same bearish force.

“Of course, market reaction also depends on liquidity conditions and broader positioning,” Taha stated. “But strictly from the chart data — the intensity is lower.”

Bitcoin briefly tested $70,000 on February 26 but failed to hold that threshold, settling into a range between $66,600 and $68,600 over the past 24 hours per CoinGecko data, with observers at Glassnode saying that despite the relative stabilization, the BTC market is yet to recover.

At the time of writing, the flagship cryptocurrency was trading almost 200 bucks below the $68,000 level, down slightly by 0.4% in the last 24 hours and seeing no change over seven days. However, on a 30-day basis, the asset is nearly 24% lower, and it is also about 46% below its October 2025 all-time high.

Crypto market rebounds as buying surge drives total capitalization toward $2.4 trillion.

The cryptocurrency market has experienced a decisive shift in momentum over the last 24 hours. After weeks of horizontal trading and minor corrections, a wave of buying pressure has pushed the total market capitalization toward the $2.4 trillion mark. This reversal is characterized by a sharp increase in trading volume across both centralized exchanges and decentralized protocols.

Market data shows that the “Fear & Greed Index” has jumped from a state of extreme fear to a neutral-to-positive reading in a single session. This rapid change in sentiment follows a period of heavy liquidations that effectively cleared out over-leveraged short positions. With the market “cleaner” from a structural standpoint, the path of least resistance has moved to the upside, bringing the $70,000 price target back into focus for the world’s biggest crypto.

Crypto market surges as bitcoin eyes $70k

Bitcoin (BTC) is currently leading the charge, trading near $66,200 after a nearly 8% single-day gain. The asset is now within striking distance of the psychological $70,000 barrier, a level it has not firmly held since early February. This move has triggered a “halo effect” across the altcoin market, where several top-tier assets are outperforming Bitcoin on a percentage basis.

Solana (SOL): Known for its high beta to market moves, SOL jumped 13% on February 25, reaching an intraday high of $89 as it tests key resistance zones.

Ripple (XRP): Rebounding from recent lows, XRP added 8% to its value, supported by increased clarity in ongoing regulatory discussions.

Dogecoin (DOGE): The leading memecoin saw a 9% spike, reflecting a return of retail speculative appetite as the broader market turns green.

3 reasons why the crypto market is surging

Record ETF Inflows: US-based spot Bitcoin ETFs recorded over $506 million in net inflows on February 25 alone. This represents the strongest single day of institutional buying since early 2026. This “smart money” accumulation provides a solid floor for the price and offsets selling pressure from short-term traders.

Short Squeeze and Liquidations: The sudden price jump forced the closure of over $571 million in bearish short positions. As these traders were “squeezed” out of their bets, they were forced to buy back Bitcoin and Ethereum, creating a feedback loop that accelerated the upward price movement.

Sparkling Retail Interest in Utility Protocols: There is a noticeable shift in how retail investors are allocating their capital. Instead of chasing high-risk memecoins, many are moving into utility-driven protocols that offer functional financial services. This new wave of interest is focused on platforms that provide financial tools, such as decentralized lending.

Profit reallocation and the rise of utility protocols

Historically, bullish periods in the crypto market follow a specific pattern. Once large-cap assets like Bitcoin and Ethereum finish their initial rally, investors and traders often reallocate their profits into cheaper sectors. 

This “capital rotation” is currently favoring new utility protocols that show significant momentum. A prime example of this trend is Mutuum Finance (MUTM). This Ethereum-based project is building a non-custodial lending and borrowing ecosystem designed to help long-term holders unlock the value of their assets without selling them. 

Mutuum Finance is already proving its concept with a recently launched protocol version that has attracted the attention of over 19,000 investors. The project has successfully raised over $20.6 million in funding, signaling strong confidence from its community. Currently, the MUTM token is priced at $0.04, reflecting a steady growth phase as the project prepares for its full mainnet transition.

The design and functionality of the V1 protocol

The Mutuum Finance V1 protocol is currently live on the Sepolia testnet, allowing users to interact with a fully functional decentralized credit market. The system is designed to handle high-value assets, including USDT, ETH, LINK, and WBTC.

Lending and mtTokens: When a user supplies assets to the protocol, they receive mtTokens. These interest-bearing receipts represent the user’s share of the liquidity pool. For example, if a lender deposits 1,000 USDT, they receive 1,000 mtUSDT. 

As borrowers pay interest, the value of these tokens grows automatically; if the pool earns 5% interest, those 1,000 mtUSDT become redeemable for 1,050 USDT after one year, providing the lender with a passive yield.

Borrowing and Debt Tokens: Borrowers can use their deposited assets as collateral to take out loans. This process generates debt tokens, which track the borrower’s liability within the system. For instance, if a user provides $2,000 in ETH as collateral to borrow $1,000 in stablecoins, the protocol issues 1,000 debt tokens to their account. 

Because the system is non-custodial, the user retains full control of their funds through smart contracts, and they simply need to return the value represented by those 1,000 debt tokens plus interest to unlock their original collateral.

A user provides more collateral than they borrow to maintain ownership of their assets while gaining liquidity. By borrowing instead of selling, a user keeps 100% of any future price increases on that collateral and avoids the capital gains taxes triggered by a sale. 

Top assets eyeing new highs

As the market stabilizes, top cryptocurrencies like BTC, ETH, and XRP are eyeing significant technical milestones. Bitcoin is currently focused on flipping the $70,000 resistance into a support level, which many believe would trigger a run toward its previous all-time highs. Ethereum is similarly eyeing the $2,100 mark, supported by the technical upgrades outlined in the recent “Strawmap” roadmap.

At the same time, Mutuum Finance is moving forward with its official roadmap plans with a focus on facts and technical milestones. The next crypto stages include the integration of Layer 2 (L2) scaling to reduce transaction costs and the implementation of a buy-and-distribute mechanism. This model will use protocol fees to support the MUTM token’s ecosystem directly.

Key takeaways:

• Analysts downgraded US stocks due to high valuations, a weak dollar and policy risks despite AI-driven earnings growth.

• Limited S&P 500 upside may shift capital toward Bitcoin, especially if major sovereign funds announce BTC reserves.

Bitcoin (BTC) price plunged below $65,500 on Friday, effectively erasing gains established on Wednesday. This correction closely tracked intraday S&P 500 movements after wholesale inflation data in the US triggered increased risk aversion. A report from investment bank UBS downgrading US stocks to neutral likely accelerated the surge in demand for the safety of fixed-income assets.

Investors fear that a potential doomsday scenario for the US equities market could drive Bitcoin to new yearly lows. While increased spending on artificial intelligence infrastructure remains a primary concern for some, Bitcoin’s long-term trajectory is unlikely to remain dependent on the technology sector.

Institutional Bitcoin adoption could improve market sentiment

According to the UBS global equity strategy team, valuations within the US equity market are no longer attractive compared to other global regions. Analysts cited mounting risks from a weakening dollar and US policy turbulence, which are creating asymmetric structural downside risks. Furthermore, corporate buybacks appear to be losing their effectiveness in sustaining price levels.

The relevance of the $70 trillion US market capitalization should not be overstated, even as it disturbs price trends on supposedly uncorrelated assets like Bitcoin. Still, the UBS report is far from a doomsday prediction, especially considering their year-end S&P 500 target remains at 7,500.

Part of the recent decline to $65,500 is explained by Friday’s US Producer Price Index jumping 0.5% in January from the previous month. When inflation metrics surprise to the upside, traders often become less certain regarding interest rate cuts from the US Federal Reserve. A restrictive monetary policy negatively impacts the economy as credit remains expensive and companies have fewer incentives to expand production.

The US Treasury yield serves as a proxy for investor risk assessment. During periods of uncertainty, traders seek shelter in government bonds, regardless of current inflationary trends. The unusual decline in the US 10-year Treasury yield to 3.97% from 4.21% just three weeks prior signals a shift toward risk-averse sentiment. This is particularly notable as the S&P 500 exhibited signs of weakness despite positive surprises in corporate earnings.

The UBS global equity strategy report says US stocks are trading 35% above global peers, versus an average premium of 4% since 2010. Analysts mentioned volatility added by US policy proposals to cap credit card interest rates, implement additional import tariffs and place potential limits on private equity investment in housing. However, the bank expects AI adoption in the US to help sustain earnings growth across key industries, according to CNBC.

If the S&P 500 upside proves limited, Bitcoin could benefit from eventual capital rotation as gold, the absolute leader store of value, has already soared to a $36.5 trillion market capitalization. To put things in perspective, the 10 largest tech companies have a combined market capitalization of $24.2 trillion. Even if Bitcoin price rallies by 52% to $100,000, its market capitalization would be $2 trillion. Thus, unless fixed income or real estate markets benefit from the potential capital rotation, Bitcoin remains a valid candidate.

Related: Spot Bitcoin ETFs take in $1B in three days as investors buy the dip

Sentiment toward Bitcoin could shift favorably as soon as new major companies or sovereign funds announce strategic BTC reserves, even if formed through exchange-traded fund (ETF) exposure. There is no way to predict when those events could happen, but history has proven how trader risk perception can shift favorably when a company such as Tesla (TSLA US) announced a relevant Bitcoin position. But until then, the odds of an onchain decoupling from the US stock market remain low.