Ethereum (ETH) is at a delicate and potentially pivotal market turning point. According to the latest derivatives data, the funding rate of ETH perpetual contracts continues to decline, even showing negative values on some exchanges. Analysts generally believe this signal may indicate that the market is building momentum, brewing a full-fledged rally.
After experiencing the high volatility pullback in September, ETH price Stabilizing around the $4000 range. Now, the decline in the funding rate not only reflects cautious market sentiment but may also indicate that bearish positions are exhausting their downward space.
1. The "hidden signal" of the funding rate: short bets are cooling down.
The funding rate is a key indicator of the bullish and bearish sentiment in the futures market. When the funding rate is positive, it indicates that the bulls are willing to pay fees to maintain leveraged positions;
When the funding rate turns negative, it indicates that short positions dominate the market, and they may even pay fees to maintain their short positions.
Currently, the major trading platforms for Ethereum (including Binance, OKX, and Gate Perp DEX) show that the average funding rate for ETH perpetual contracts has dropped to a range of -0.005% to -0.01%. This indicates that the overall market sentiment for shorting ETH is weakening.
According to Coinglass data, when the funding rate of ETH has shown a similar continuous decline in the past, it often precedes a price bottoming out and a strong rebound. For example:
- In March 2023, after the funding rate turned negative, ETH rose from 1400 dollars all the way up to 2100 dollars.
- By the end of 2024, the Federal Reserve’s interest rate cut expectations strengthen, the ETH funding rate falls back to neutral, and then it experiences a 70% increase.
2. On-chain data: Changes in capital inflow and holding behavior
The on-chain monitoring platform IntoTheBlock pointed out that the funding inflow of Ethereum has significantly rebounded recently. In just the first week of October, the net inflow into institutional wallets was approximately $620 million, marking a new high in nearly three months. At the same time, the number of long-term holder (LTH) wallets increased by 3.5%, indicating that funds are gradually shifting from short-term speculators to medium- to long-term investors.
In addition, the total amount of staked ETH has also exceeded 36.8 million, accounting for approximately 30.5% of the circulating supply.
This not only compresses the market’s immediate liquidity but also strengthens price support.
Analysts point out that this "supply tightening + capital accumulation" structure provides the underlying fuel for the next round of increases. Especially when the funding rate is low, the short leverage decreases, making it easier for the market to experience a short squeeze, triggering a chain reaction of price increases.
3. Fundamental support: From L2 expansion to mainnet revenue growth
From a fundamental perspective, the technology and economic model of Ethereum are entering a mature stage.
- Layer-2 Expansion Effect: The transaction volume share of Layer 2 networks such as Arbitrum, Optimism, Base, and zkSync has exceeded 60%, significantly alleviating congestion on the mainnet.
- The effects of EIP-4844 (Proto-Danksharding) continue: the cost of data availability has decreased by 90%, driving more DeFi, GameFi, and AI protocols back to the Ethereum ecosystem.
- Network revenue continues to grow: According to Token Terminal data, Ethereum protocol revenue exceeded 840 million dollars in Q3 2025, a year-on-year increase of 28%.
More importantly, the Ethereum inflation rate has been consistently maintained at around -0.25%, which means its supply is in a "net contraction" state.
In the context of macroeconomic uncertainty, the "deflationary asset property" of ETH has become an important value anchor.
4. Institutional Perspective: ETH has once again become the "super Bitcoin" asset.
The attitude of institutional investors is also quietly changing.
According to a joint report by Bloomberg and Kaiko Research, since the end of September, the institutional open interest in ETH futures has increased by 17%, while the open interest in BTC futures has grown by only 4%.
This means that large funds are reallocating the weight of Ethereum in their portfolios.
Analysts believe that the revenue structure of Ethereum (staking + DeFi yields + protocol revenue) is closer to the "cash flow model" of traditional stocks, rather than being purely a value storage tool. Therefore, during the period when U.S. Treasury yields are declining and capital seeks growth assets, ETH has greater Beta elasticity compared to BTC.
5. Market Outlook: The next round of market trends may "be led by Ether"
Currently, the key support level for Ether is in the $3,850–$3,900 range, while short-term resistance is at $4,250.
If the funding rate remains low and on-chain indicators continue to improve, the market may see a breakthrough move towards $4,800–$5,000 in the coming weeks.
Analysis agency Glassnode pointed out that the derivatives leverage of ETH has dropped to a nearly six-month low, while the spot trading volume continues to rise. This "low leverage + high volume" structure is often a precursor to the start of a bull market.
6. Conclusion: Low funding rate, a hidden strong signal
The funding rate is often one of the most overlooked indicators in the crypto market, yet it is one of the most forward-looking signals of trend reversals. Ethereum is currently in a rare phase of "emotional trough and solid fundamentals.
