• Andrei Grachev of DWF Labs warns of a possible bear market as negative funding rates return.
• Over 30% of assets with negative funding rates could signal a buying opportunity using a DCA strategy.
• Recent metrics show a spike in negative funding rates, hinting at market volatility ahead.

“Market activation and negative funding rates are finally back,’ tweeted Andrei Grachev, co-founder of DWF Labs, suggesting a potential shift towards a bear market. 

While overall liquidity is still in recovery, negative funding rates across major centralized exchanges reflect a growing sense of pessimism among traders.

As per on-chain data, most mainstream coins are seeing funding rates below 0.005%. However, historical data reveals that when more than 30% of assets show negative funding rates simultaneously, it presents the chance to employ dollar-cost averaging (DCA) strategies. This analysis is based on the negative funding rates on both Bybit and Binance perps at any given time.

Why Are Negative Funding Rates Bearish?

Negative funding rates occur when short positions dominate the market, reflecting bearish sentiment. 

Grachev’s comments on X emphasized that the market’s activation phase has returned alongside these negative rates.

Have Negative Funding Rates Historically Been a Buy Signal?

During the market correction in January and February, analysts noted an intriguing phenomenon: negative funding rates spiked beyond 30% and even reached 50% for the first time in 18 months – a relatively rare occurrence.

Traders often see this spike as a potential buying signal. Historically, after a sharp rise in negative funding rates, the market has shown tendencies to rebound, making DCA one of the most preferred strategies. Dollar-cost averaging involves systematically investing fixed amounts at regular intervals, reducing the impact of short-term volatility.

What Are Experts Predicting for Bitcoin and Altcoins?

Despite the broader market uncertainty, some experts maintain that a market bottom may already be in place, anticipating higher prices in the future. Analysts expect Bitcoin (BTC), the leading cryptocurrency, to revisit its previous range highs, while altcoins could experience partial recoveries. 

“At the very least, we expect BTC to revisit range highs, while altcoins should see a nominal recovery, retracing at least half of their downside moves.”

As funding rates continue to fluctuate, investors should closely monitor sustained patterns before making any significant moves. For the time being, a cautious optimism seems to prevail as market participants navigate the ongoing volatility.