Short liquidations contradict negative funding rates in perpetual futures

Bitcoin's price rises catch short sellers off guard despite a bearish funding rate outlook.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

When funding rates flip negative, it often heralds a bearish trend as traders anticipate a decline. However, in an intriguing twist, Bitcoin experienced massive short liquidations — usually a sign of a price surge. What's driving this unusual market phenomenon? The answer lies in Bitcoin’s unexpected rally amid this sentiment tug-of-war. Over the past week, Bitcoin's spot price reveals a dramatic swing upwards, catching short traders off guard. But how do the seemingly pessimistic funding rates reconcile with this bullish reality? Dive deeper to uncover how timing mismatches and price volatility create this perplexing scenario...