Persistent Bearish Signal in Bitcoin Funding Rate Index Warns of Market Risks

Crypto market tension continues to experience persistent downward pressure through two key indicators measuring Bitcoin market health. The dominant bearish conditions have created an extreme situation, where derivative funding flows and liquidity stress levels form a market picture pointing toward potential capitulation. Recent analysis indicates that bearish momentum remains strong since late January.

Bitcoin Funding Flow Index: Drastic Decline Signals Ongoing Pressure

The Bitcoin Futures Funding Flow Index, which combines price dynamics with capital flows in the derivatives market, has experienced a significant decline in recent days. The index value, previously at 50, has dropped to a critical 7.1%—reflecting an extreme condition and the lower bound of the measurement scale. Data from BlockBeats shows that this deterioration results from a persistent downtrend since January 28, confirming that the market remains in a sustained bearish state.

When the index falls below the 45% threshold—an event that has occurred since January 30—the market officially enters what is defined as the bearish zone. The recorded 7.1% figure is historically often associated with market capitulation, a state where seller panic reaches its peak. For the market to shift, the index needs to rise above the 45% threshold, while Bitcoin prices must also stabilize. So far, each rally has been merely a technical correction within the larger bearish structure.

Bitcoin Local Stress Index: Simultaneous Pressure from Volatility and Funding Flows

Another complementary indicator, the Bitcoin Local Stress Index (LSI), offers a broader perspective by integrating price volatility, derivative funding rates, and leverage levels into a comprehensive metric. This index is designed to capture moments when all market pressures converge simultaneously.

On the night of January 31, when Bitcoin’s price dipped below $78,000, the LSI peaked at 92.5—indicating extreme stress levels. Throughout the following weekend, the index remained in a “tail risk warning” status, suggesting that all pressure mechanisms (downtrend, increased volatility, and negative bias in funding flows) had been activated simultaneously. The current reading of 73 still indicates a high level, though slightly eased from its peak.

Historically, when the LSI exceeds 90, such peaks often coincide with the formation of local price bottoms. However, if the index drops back below 80 under renewed selling pressure, it would signal a continuation of sharp, ongoing declines.

Capitulation Zone: When Liquidity and Stress Reach Maximum Levels

When these two indices are analyzed comprehensively, the picture that emerges is of a market in a phase where funding flows are very low and local stress levels remain high. This combination is characteristic of capitulation—an environment where pressure reaches its limit and the market begins to absorb large liquidity shocks.

Recent data shows Bitcoin trading at $65,850 as of February 12, with a 24-hour decline of 3.16%, reflecting persistent short-term volatility. Such moments have historically often marked the formation of local bottoms, but ongoing pressure may persist until key indicators show a genuine recovery.

For traders and investors, this persistent situation demands vigilance around critical support and resistance levels, while monitoring whether these technical indices will signal a reversal or confirm continued bearish pressure.