Bitcoin (BTC) Funding Rate Divergence Is Flashing a Warning

Bitcoin (BTC) is once again at a crucial juncture as it trades above $95,000, following weeks of positive price action. While the cryptocurrency has been performing well, some key indicators suggest that we may not be able to get too excited yet.

One of the most concerning signals is the divergence in funding rates. Despite the price continuing to move higher, we can see that perpetual futures funding rate recently flipped negative—something we last saw during the big Bitcoin correction of 2024, March to October.

Now, there’s a good chance that if the funding rate is negative, we’re also seeing pretty good downtrend in the price of BTC. Following a 200 basis point cut in July, analysts at Compass Point see a 300 basis point window in which the BTC price needs to fall before the downward spiral reverses.

A Final BTC Price Prediction For 2025 From Compass Point

"The optimists among us will be pleased to learn that, according to Compass Point, there is a 300 basis point window in which the BTC price needs to decrease from the present level before the downward spiral reverses. In essence, if the price drops below $71,750, we can anticipate a continuation of the decline, potentially setting the stage for a new all-time low. However, if the price manages to remain above this critical threshold, we can expect to see a continuation of the upward trend, potentially paving the way for new highs," the analysts explained.

Several possibilities arise from this observation. Firstly, it could indicate hedging activity around a key resistance zone, with traders either locking in profits or preparing for a potential rejection at this upper range.

Another interpretation is that the negative funding rate might be signaling something about distribution. If larger players are dumping their BTC positions into strength, then this would make for a pretty good short-term trading opportunity. And if retail traders are the ones chasing this rally, that’s even better.

In either case, the divergence signals that the market is starting to get a bit cautious in the short term. If the present pattern is any indication, the next step will be a pullback. And this next step is looking more and more likely as time goes on.

However, there’s another side to this story—one that hints at accumulating strength and strength over the long haul.

Over 8,000 BTC have been withdrawn from Coinbase in just the past five days. This is equivalent to about $763 million. When we see this kind of mass withdrawal, it typically means long-term investors are in charge. They’re the ones moving coins off exchanges and into cold storage.

And when we see Bitcoins exiting exchanges in such large quantities, it means two things: 1) There’s reduced selling pressure. 2) There’s an even tighter supply, which means we might see some price increases in the near future.

Market veterans have seen this happen before: it starts with the outflows, and then comes the rally.

The increasingly bullish case for Bitcoin is being upheld by the ongoing interest from institutional investors. On April 29, spot Bitcoin ETFs collectively recorded a net inflow of $173 million, extending their streak to eight consecutive days of positive flows.

This continued buying activity from ETFs adds a layer of support to the current market structure, helping to absorb sell-side liquidity and creating a floor for prices.

On April 29, spot Bitcoin ETFs recorded a total net inflow of $173 million, marking eight consecutive days of net inflows. Spot Ethereum ETFs saw a net inflow of $18.40 million, continuing a four-day streak of net inflows. https://t.co/SF4brkl9iI

— Wu Blockchain (@WuBlockchain) April 30, 2025

These cash movements also underscore a larger trend: Bitcoin is increasingly being seen as an asset to hold long-term, not something to speculate with. Given the backdrop of uncertain macroeconomics, questionable central bank policies, and rampant inflation, lots of big institutions keep trying to get some BTC on their balance sheets as a digital hedge.

All these data points—negative funding rates, heavy exchange outflows, and steady ETF inflows—show a picture of a market at a crossroads.

Should Bitcoin survive at present levels and verify a breakout on the weekly chart, the stage could be set for a significant move upward—perhaps even a new all-time high. But if the short term is all about caution and sinking funding rates, maybe what we really need is a decent correction to reset market sentiment and shake out the weak hands.

Currently, whether they be traders or investors, all would do well to keep a keen watch over exchange flows and ETF demand. These on-chain and institutional signals tend to be more evocative than price action, shedding light both