On-chain funding rate indicates a shift in crypto market sentiment—most cryptocurrencies show clear bearish signals

According to recent data from the on-chain data platform, after experiencing short-term fluctuations, the trend of funding rates on mainstream trading platforms reveals a key signal: the overall market has shifted to a bearish stance.

Funding Rate Data Reveals True Market Sentiment

From mid-January data, whether on centralized exchanges (CEX) or decentralized exchanges (DEX), the funding rates for major cryptocurrencies show negative values or operate at low levels. This indicates that short sellers are more willing to pay fees to hold their positions, reflecting cautious attitudes among market participants about the future market direction. Notably, the bearish sentiment for altcoins is particularly prominent, with funding rate data showing a clear preference for short positions over long positions.

Understanding the Core Mechanism of Funding Rates

Funding rates are an important adjustment mechanism in the perpetual contract market. When market participants are generally bullish, the funding rate rises above 0.01%, requiring longs to pay shorts; when the market turns bearish, the funding rate drops below 0.005%, and shorts pay longs to attract counterparties. This mechanism ensures a close linkage between contract prices and spot prices and directly reflects traders’ true expectations.

Signal of Decreasing Market Risk Appetite

A shift of funding rates from positive to negative or low levels is essentially a direct reflection of risk sentiment. When most traders are willing to bear the cost of fees to establish short positions, it often indicates that market participants are cautious or even bearish about short-term trends. This sentiment is especially evident in the altcoin market and also prompts investors to reassess their position risks.