**Ethereum Funding Rate Turns Negative: What History Tells Us About What’s Next**
Data shows that the Ethereum Funding Rate has recently declined into the negative zone. Here’s a look at what this trend has typically signaled over the past two months.
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**Ethereum Funding Rate Suggests Traders Are Turning Bearish**
As highlighted by analytics firm Santiment in a recent post on X (formerly Twitter), short positions are currently dominating the Ethereum derivatives market.
The key metric to understand here is the “Funding Rate,” which represents the periodic fee exchanged between traders on various derivatives platforms. When the Funding Rate is positive, it means long holders are paying a premium to those holding short positions to maintain their bets, reflecting predominantly bullish sentiment.
Conversely, when the Funding Rate dips below zero, it indicates that short positions outweigh long ones, suggesting a bearish mentality among derivatives traders.
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**Bearish Sentiment Doesn’t Always Mean Price Decline**
Interestingly, a negative Funding Rate may not necessarily correspond with a drop in Ethereum’s price.
Santiment’s analysis over the past two months reveals a recurring pattern: Ethereum’s price tends to move opposite to the Funding Rate. Specifically, elevated positive Funding Rates have often preceded price corrections, while negative Funding Rates have often led to price rebounds.
This pattern could be driven by the fact that the dominant side of the market is more vulnerable to liquidation squeezes — sudden, violent cascades of forced position closures that trigger sharp price volatility.
While the Ethereum Funding Rate is currently negative, it hasn’t yet reached the deeply negative levels seen in prior periods that fueled short squeezes. Whether that will happen this time remains to be seen.
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**Ethereum Exchange Outflows Signal Long-Term Investor Confidence**
In other news, Ethereum experienced significant net exchange outflows totaling approximately $643 million over the past week. This data, shared by institutional DeFi solutions provider Sentora on X, indicates that investors are moving coins off exchanges.
“This is a strong bullish signal despite market uncertainty, as investors are moving coins into self-custody for long-term holding,” Sentora explained.
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**Current Ethereum Price Update**
At the time of writing, Ethereum is trading around $3,850, up over 2% in the last 24 hours.
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*Sources: Santiment, Sentora, TradingView*
https://bitcoinist.com/ethereum-funding-rate-red-short-squeeze-brewing/
