ETH funding rate turns negative, but US macro conditions mute the buy signal

Ethereum (ETH) derivatives markets recently exhibited a classic contrarian buy signal, as the perpetual funding rate briefly dipped into negative territory for the first time in several months. A negative funding rate indicates that short traders are paying long traders, suggesting heavy market leverage positioned to the downside and typically setting the stage for a short squeeze or a local bottom.

However, this seemingly bullish technical indicator has failed to spark any significant price rally. The primary dampener on aggressive buying is the persistent strength of the US macro narrative. Recent economic data, particularly persistent inflation figures and robust employment numbers, have reinforced the Federal Reserve’s commitment to a ‘higher for longer’ interest rate environment.

This sustained tightness in monetary policy increases the opportunity cost of holding volatile risk assets like cryptocurrencies and keeps systemic liquidity under pressure. Consequently, traders are prioritizing capital preservation amidst macro uncertainty over chasing derivatives signals. The fear of a major market drawdown triggered by upcoming CPI reports or hawkish Fed commentary outweighs the technical optimism generated by the funding metric. Until clearer guidance on inflation control or a material shift in central bank rhetoric occurs, the technical buy signal generated by the ETH funding rate is likely to remain overridden by broader market risk aversion, leading to sideways consolidation rather than an immediate reversal.

Source: ETH funding rate turns negative, but US macro conditions mute the buy signal