Funding rate rebounds but remains sluggish, false prosperity amid market liquidity exhaustion

The funding rate in the perpetual contract market has experienced subtle changes. According to the latest news, the 7-day moving average funding rate across major perpetual contract markets has rebounded from near 0% to 0.005%, then fell back to 0.003% over the past 24 hours. Behind this seemingly small fluctuation lies the true state of current market sentiment.

What Does the Funding Rate Say

Data reveals the truth through comparison

The funding rate is an important indicator of market bullishness and bearishness. When the rate is positive and relatively high, it indicates strong bullish sentiment and a bullish market atmosphere; when the rate is near or negative, it suggests a lack of market confidence.

Based on historical data, sustained market rises are often accompanied by funding rates remaining above 0.01%. The current level of 0.003%, while improved from the lowest point at 0%, is still far below the level needed to form a decisive bullish signal.

Contradictory Market Phenomenon

Here emerges an interesting contradiction. According to relevant information, the spot trading volume of Bitcoin and altcoins has hit a new low since November 2023, with market liquidity becoming increasingly thin. Yet, prices are rising. What does this mean?

This situation typically indicates that the price increase is not driven by widespread market demand and capital inflows, but rather by a small amount of funds pushing prices higher in an environment of low liquidity. In other words, it could be a sign of a false prosperity.

A True Reflection of Market Sentiment

Support exists but is not decisive

Although the current market environment still has support (funding rate is positive), this support is not enough to generate a decisive bullish signal. The 0.003% funding rate indicates that while bulls are in the majority, their strength is limited. This suggests that market participants’ confidence in the subsequent trend is still insufficient.

Signals to Watch Out For

The combination of trading volume hitting a four-month low and low funding rates sends a clear signal: the current price increase lacks sufficient liquidity support. In such an environment, any price fluctuations could be amplified due to liquidity shortages, increasing market fragility.

It is also important to interpret market position data cautiously. According to recent analysis, the aggregation behavior of exchange wallets can distort on-chain data, creating an illusion of large-scale buying, when in fact it may just be internal redistribution. This reminds us to be more cautious when analyzing market data.

What to Watch for Next

The trend of the funding rate will be a key indicator for judging a market sentiment reversal. If the funding rate continues to rise and breaks through 0.01%, it indicates that market confidence is truly recovering; conversely, if it remains low or declines further, the market’s weakness may persist. Additionally, whether trading volume can increase in tandem with rising prices is an important reference for assessing the sustainability of this rally.

Summary

The current market shows a “weak support” state: although the funding rate is positive, it remains far below historical highs; trading volume hits a new low while prices rise, creating a contradiction. The market has support but lacks decisive bullish signals. This combination indicates that market participants’ confidence is still insufficient, and the sustainability of the price increase remains to be seen. In an environment of thin liquidity, any small disturbance could trigger significant volatility, making caution even more necessary.