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Funding Rate Turns Negative, Sparking Bullish Expectations

Bitcoin has once again captured market attention after its perpetual futures funding rate briefly dipped into negative territory in late June. This event, often seen as a precursor to major price rallies, aligns with a historical pattern where similar occurrences preceded significant price surges. In the past, funding rate flips in September 2024 and July 2023 were followed by gains of 80 percent and 150 percent, respectively.

The latest move saw Bitcoin’s spot price jump from below 100,000 dollars to around 108,000 dollars, reinforcing optimism among bulls that the market is setting up for another powerful move upward.

What a Negative Funding Rate Really Means

In crypto markets, a negative funding rate signals that traders holding short positions are paying long-position holders to maintain their trades. This often suggests a bearish sentiment in the derivatives market. However, when this bearish signal appears during a broader price uptrend, it typically leads to a build-up of short interest that becomes increasingly vulnerable to a short squeeze.

BTC/USD daily price chart. Source: TradingView
BTC/USD daily price chart. Source: TradingView

A short squeeze occurs when short traders are forced to buy back into the market to cover their positions as prices begin to rise, adding upward pressure and fuelling rapid price movements. Bitcoin’s latest recovery of its funding rate into positive territory reflects past market behaviour, suggesting the bearish sentiment may have reached exhaustion and a new bullish leg is about to begin.

Short Liquidations Near 111,320 Dollars Could Act as a Launchpad

According to data from CoinGlass, the level of 111,320 dollars on the BTC/USDT trading pair holds the highest concentration of predicted liquidations over the past three months. An estimated 520 million dollars in leveraged short positions are currently exposed at this price level.

If Bitcoin’s price touches this liquidity cluster, it could set off a large-scale short squeeze. This would force short sellers to exit by buying back into the market, pushing the price even higher and possibly propelling BTC into new price discovery territory.

Breakout From Bull Flag Pattern Points to Higher Targets

Technical analysis adds further support to the bullish outlook. Bitcoin has broken out above the upper trendline of a bull flag pattern on the daily chart, a structure typically associated with continued upward momentum after a consolidation phase.

The flagpole of this pattern suggests a measured move towards 117,500 dollars. This aligns closely with a forecast made by Markus Thielen, head of research at 10x Research, who predicts Bitcoin will hit 116,000 dollars by the end of July.

Market Momentum Gathers as Historical Patterns Repeat

The current setup combines both technical and sentiment-driven factors that have historically preceded strong price rallies. The blend of a recovered funding rate, potential short squeeze zone, and a classic breakout pattern has energised bullish expectations.

Investors and traders alike will be closely watching whether Bitcoin can surpass the critical resistance near 111,320 dollars. If it does, the move could ignite a powerful rally, pushing BTC toward its projected targets and possibly beyond.

Binance BTC/USDT liquidation heatmap (3 months). Source: CoinGlass
Binance BTC/USDT liquidation heatmap (3 months). Source: CoinGlass

While the market remains volatile and sensitive to macroeconomic shifts, the signals from Bitcoin’s derivatives and spot markets are once again aligning in favour of the bulls. Whether history will repeat itself remains to be seen, but the conditions are now in place for Bitcoin’s next big move.

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Julian Maddox
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