Is Bitcoin Turning Bearish Again? This Analysis Thinks So

Bitcoin has staged a strong recovery recently, bouncing back from a dip below $75,000 to trade just over the $95,000 mark. While this double-digit percentage gain has stirred bullish excitement, there are growing signs that not all market participants are convinced. 

Certain technical and on-chain signals suggest that this may not be a sustained rally, but rather a temporary relief before another downturn.

Funding Rate Divergence Is Raising Concerns

One of the more telling signs of market sentiment lies within the derivatives market, particularly funding rates on perpetual contracts. These rates indicate the balance between long and short positions, effectively showing whether traders are betting on a rising or falling market.

At present, there’s a noticeable divergence: while Bitcoin’s price has continued to rise, funding rates have started falling, even turning negative across several exchanges. 

In practical terms, this means traders are becoming more cautious, hedging their positions, or actively shorting the market despite the ongoing rally.

This divergence is significant. When prices climb while funding rates decline, it often implies that traders do not fully trust the price action. They may be reducing exposure or preparing for a reversal, particularly near psychological or technical resistance zones such as the $95,000 area.

This pattern echoes behaviour observed during Bitcoin’s previous correction cycle between March and October 2024, when similar divergences led to pullbacks. During that period, rallies were repeatedly undermined by persistent negative sentiment in the derivatives market. Traders opted for short positions or hedged exposure, limiting upside momentum.

The key takeaway here is that negative funding rates during price rallies often reflect imbalance, rising prices driven more by spot buying or short-term sentiment rather than long-term conviction. When this happens, it can lead to brief surges followed by sharp corrections.

Read more: Why These Two Patterns Are Key for the Next Bull Market

Could a Pullback Strengthen the Broader Market?

Although some signals are pointing to a bearish short-term shift, not all outcomes are negative. Analysts suggest that a moderate retracement will benefit the broader market structure in the long run.

If prices were to retreat modestly from the current region, it could lead to a healthier rebalancing of positions. Weak hands, those who entered purely for the short-term upside, may be shaken out, allowing for stronger consolidation among committed holders.

This process can also improve liquidity conditions and reduce leverage, particularly in derivatives markets where sentiment has become overly cautious. A reset of funding rates after a pullback might encourage a more stable rally in the future.

It’s also worth noting that similar structures have preceded renewed bull runs. In the past, Bitcoin has often pulled back slightly at resistance zones before resuming upward movement with greater strength and conviction. 

These pauses tend to be supported by increased accumulation activity and clearer directional commitment from traders and investors.

Of course, this outcome is not guaranteed. Much depends on macroeconomic conditions, regulatory developments, and the performance of related assets like Bitcoin ETFs. Still, a small pullback now may be just what the market needs to set up a more meaningful move higher in the weeks ahead.

For now, caution seems warranted. The price may be rising, but market participants are showing hesitation beneath the surface. Whether this results in a brief dip or a more significant correction remains to be seen, but the warning signs are becoming harder to ignore.

Conclusion

Bitcoin’s recent climb past $95,000 has revived optimism in the market, but several underlying signals suggest this recovery may be on shaky ground. 

The divergence between price action and funding rates, combined with the proximity to the short-term holder realised price, points to a cautious market sentiment and potential pullback.

While this does not confirm a full reversal, it highlights the importance of watching structural signals rather than just price. A brief correction now could help solidify the foundation for future gains, especially if it helps flush out excessive risk and rebuild stronger support.

For those looking to take advantage of any future Bitcoin dips or manage their exposure securely, platforms like Bitrue offer a simple and safer way to trade, stake, or hold BTC without needing to navigate the complexities of futures markets or technical setups.

Read more: Strategy Now Owns More than Half a Million BTC!

Frequently Asked Questions

1. What does a negative funding rate mean for Bitcoin?
It usually means that more traders are shorting the asset or hedging against downside, which can indicate cautious sentiment even if price is rising.

2. Why is the Short-Term Holder Realised Price important?
It reflects the average cost of coins held by recent buyers. If the price stays above this level, it often signals support; if it drops below, selling pressure may increase.

3. Should I sell if Bitcoin is showing bearish signs?
Not necessarily. A bearish signal could lead to a short-term dip, but many traders use such moves to accumulate. It depends on your risk tolerance and time horizon.

Investor Caution 

While the crypto hype has been exciting, remember that the crypto space can be volatile. Always conduct your research, assess your risk tolerance, and consider the long-term potential of any investment.

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