Analysts say that the market has removed a lot of leverage. This makes a big crash less likely, but

Bitcoin's Funding Rate Stays Negative for Weeks, Open Interest Plunges—Market's 'Fuel' Running Low

The Bitcoin perpetual swaps market is sending some interesting signals. According to independent analyst Axel, funding rates have been stuck in negative territory for most of February and into early March. That's a pretty clear sign that short sellers have been running the show in the perpetual futures market.

This isn't just a recent thing. Funding rates have been dipping into the red frequently since late January. But over the last two weeks, they've basically lived there, with barely any bounce. The most extreme readings? February 25 and 28—right when price was testing those local lows around $64,000–$65,000. As of March 4, funding was still slightly negative. Two straight weeks of this points to one thing: the bias is still heavily bearish.

Quick refresher: negative funding means shorts are paying longs to keep their positions open. So yeah, the market's skewed short. Historically, this setup can go one of two ways. Either it primes the pump for a short squeeze if prices start moving up, or it just confirms the downtrend if things keep sliding. The real game-changer would be funding flipping back to sustained positive, price holding above that $70K resistance level, and open interest starting to stabilize or grow.

Speaking of open interest—that's another story. USD-denominated Bitcoin futures open interest has cratered. We're talking down from a peak of $47.6 billion in October 2025 to just $20.8 billion now in March 2026. Sure, some of that drop is just because Bitcoin's worth less now. But the bigger picture is that leverage is getting flushed out of the system during this correction.

Let's put some numbers on it. Open interest is down more than half from that October peak. It's also dropped about a third from the January high of $32 billion. And as of March 4, it's sitting at $20.8 billion—levels we haven't seen since before the 2025 rally even started. In the last seven days alone, it's fallen another 3.2%. So deleveraging is still happening, just slower than before.

When open interest drops alongside price, that's usually a sign of forced or voluntary liquidation. The market is unloading baggage. And that's what makes this different from a classic short squeeze setup. With open interest this low, there's just less fuel in the tank to trigger a massive liquidation cascade. Sure, a local squeeze could still happen. But the risk of a full-blown downside cascade? Way lower than it was back in January.

So here's the picture these two metrics paint, and it's more nuanced than it looks at first glance. Leverage has mostly left the building—open interest collapsed from $47.6B to $20.8B. But the players who are still in the game? They're mostly short, as the negative funding shows. That combo lowers the risk of a big downside cascade, but it also means there's not much firepower for a spontaneous short squeeze. The system's running on fumes.