How Bitcoin’s 92% Funding Rate crash could impact BTC prices

Key Takeaways

What does the leverage rebound reveal about market sentiment?

Traders are cautiously reentering the market, signaling gradual confidence without excessive risk-taking.

How does declining MVRV and Funding Rates shape Bitcoin’s short-term outlook?

The drop in profitability and speculative leverage suggests a cooling phase before potential re-accumulation.

Bitcoin’s [BTC] leverage activity on Binance has started to rebound after a sharp mid-October decline, signaling a cautious return of risk appetite among traders. 

The estimated leverage ratio climbed from 0.148 to 0.166 as Bitcoin briefly reclaimed $110K before sliding lower again. 

This modest uptick highlights renewed confidence after recent long liquidations, though buyers remain wary of overexposure. 

However, the muted response in price suggests that traders are testing market strength gradually, avoiding the aggressive positioning that often triggers renewed volatility in overheated conditions.

Is weakening profitability signaling a cooling phase?

The MVRV ratio has dropped to 1.95, at press time, marking a 2.81% decline and indicating reduced profitability among holders. 

When this metric falls below 2, it typically means that most investors are holding coins near or below their acquisition cost, reflecting subdued enthusiasm. 

However, this environment can also discourage profit-taking, limiting downside pressure if prices stabilize. 

Historically, similar levels have preceded short-term consolidations, as sentiment shifts toward neutrality. 

Therefore, the current reading suggests that while profit margins are thinning, sellers appear less motivated to offload their positions at a loss.

Source: CryptoQuant

Derivatives cool off as Funding Rates crash over 90%

Funding Rates have plunged by 92.83%, as of writing, underscoring a significant cooldown in speculative leverage across the derivatives market. 

This dramatic drop suggests that traders are no longer aggressively opening long positions, favoring risk management over speculation. 

However, the steep contraction also signals that excessive optimism has been flushed out, setting the stage for a potentially healthier market reset. 

Historically, such sharp declines in funding have preceded periods of consolidation, as both bulls and bears reassess their positioning amid reduced market liquidity.

Source: CryptoQuant

Bitcoin’s scarcity narrative weakens!

At the time of writing, the Stock-to-Flow Ratio (S/F) has declined by 25%, hinting that Bitcoin’s scarcity strength has softened in the short term. 

This decline often correlates with an increase in circulating supply or reduced long-term holder conviction. 

However, lower S/F levels can create accumulation opportunities when coupled with stabilizing prices. 

The metric’s current trajectory reflects market hesitation but not capitulation, implying that scarcity-driven narratives may regain momentum once demand rebalances. 

Consequently, the broader trend still leans toward long-term accumulation despite short-term supply pressure.

Source: CryptoQuant

Is Bitcoin preparing for a steadier consolidation phase?

Bitcoin’s metrics collectively portray a cautious market transitioning from volatility toward stabilization. 

The rebound in leverage, declining MVRV, and cooling derivatives suggest a measured recalibration rather than renewed bullish momentum. 

If Bitcoin sustains its base near current levels, the ongoing reset could evolve into a foundation for gradual accumulation, paving the way for confidence to rebuild in the next market cycle.