Haciyev Reşit 
A notable divergence has recently been observed between Bitcoin (BTC) and Ethereum (ETH) in the crypto market. According to data from on-chain analytics firm Santiment, the Funding Rate indicator is showing different trends for BTC and ETH; investors are favoring long positions in Bitcoin, while short positions are becoming more prominent on the Ethereum side. This situation highlights how market participants are differentiating their risk perception and investment preferences between the two largest crypto assets.
What Is the Funding Rate and Why Is It Important?
The Funding Rate is a key indicator that tracks the periodic fees paid by derivatives traders across all centralized exchanges at regular intervals. It is used to measure overall market direction and investor sentiment. A positive Funding Rate indicates that long positions are paying short positions, signaling that bullish sentiment is dominant in the market. Conversely, a negative Funding Rate shows that short positions outweigh longs, pointing to a bearish bias. Investors and analysts use this indicator to assess risk perception in the derivatives market and to anticipate potential price movements. Especially for major crypto assets like Bitcoin and Ethereum, the Funding Rate stands out as a critical tool for understanding both short-term volatility and long-term market trends.
Diverging Trends in Bitcoin and Ethereum
Bitcoin experienced sharp fluctuations over the past day. The price briefly surged to $90,300, then quickly dropped to $86,000 and later fell as low as $85,300. Following this volatility, BTC rebounded back to $88,000. According to Santiment’s data, Bitcoin’s Funding Rate has remained positive over the past few days, indicating that long positions are dominant and that bullish sentiment continues to prevail.
Ethereum, however, tells a different story. Although ETH briefly rose to $3,000, it quickly declined to $2,830 and then to $2,790. While the Funding Rate showed a positive value before the volatility, this trend could not be sustained—unlike Bitcoin. Short positions in ETH began to outpace long positions, causing the Funding Rate to turn negative.
Is the Rise in Short Positions a Risk or an Opportunity?
According to Santiment, the increase in short positions in Ethereum should not necessarily be viewed as a negative development. Historically, heavily leveraged long positions have led to sharp liquidation events and increased price volatility. A negative Funding Rate in ETH may help reduce volatility risk to some extent. On the other hand, Bitcoin’s long-dominated market still presents both risks and opportunities for crypto investors.
Santiment stated the following:
“All assets will continue to move with Bitcoin, meaning Bitcoin’s funding rates should remain neutral or negative, creating a clear path back toward $100,000 and justifying a recovery in altcoins.”
Evaluation
The divergence in Funding Rates between BTC and ETH offers important signals for investors. While long positions dominate Bitcoin, short positions are more prominent in Ethereum, reshaping the overall volatility landscape. By closely monitoring Funding Rate data, investors can better optimize their short- and medium-term strategies.
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