The Bitcoin (BTC) market has recently experienced a notable shift in sentiment, turning decidedly bearish. This market change coincides with Wall Street’s tech-heavy Nasdaq futures trading 700 points lower, as investors express concerns over the potential impact of the cost-effective Chinese artificial intelligence startup DeepSeek on U.S. technological dominance.
In the latest data from Velo Data, Bitcoin’s perpetual futures funding rates have flipped negative. These funding rates, which are the periodic payments made between long and short positions in perpetual futures contracts, reflect a growing bearish outlook. Market participants are increasingly gravitating towards short positions, anticipating further declines in Bitcoin’s price.
The leading cryptocurrency, renowned for its market value, has seen a drop of over 3% since early Asian trading hours, hitting lows just under $98,000 at one point, based on data from CoinDesk. Correspondingly, futures linked to Nasdaq have also fallen over 3.5%, with NVIDIA—considered a bellwether in AI technology—suffering a 10% decline in pre-market trading.
Petr Kozyakov, co-founder and CEO at Mercuryo, remarked in an email that today’s sell-off seems to be a reaction to President Donald Trump’s recent endorsement of a working group on crypto policy. Notably, the declaration did not confirm the establishment of a U.S. bitcoin reserve, leaving traders feeling uncertain. Concurrently, DeepSeek’s emergence as a viable contender in AI technology has raised alarm among tech stocks, indicating that it is indeed feasible to develop AI models that compete with existing U.S. incumbents at lower costs.
Historically, the flip to negative funding rates has been indicative of local price bottoms in the crypto markets. Moreover, the threat of a short squeeze looms, where bearish traders could find themselves needing to cover their positions, leading to upward pressure on prices. Although the funding rate has turned slightly bearish, it’s still premature to label the sentiment as excessively crowded for a short position on Bitcoin.
