Funding Rates in Bitcoin Turned Negative with China's DeepSeek Effect! What Does It Mean? Here are the Details

Bitcoin (BTC) funding rates turned negative amid sharp sell-offs in Wall Street's tech-heavy Nasdaq futures, dropping 700 points in pre-market trading.

As Nasdaq Futures Fall 700 Points, Bitcoin Funding Rates Turn Negative

The setback follows growing concerns that China's artificial intelligence initiative, DeepSeek, could challenge US dominance in the sector and trigger a broader risk aversion.

According to Velo Data, the continuously negative funding rates of BTC indicate that traders are more inclined towards further rise or fall. This situation shows that more investors are betting on further price drops by taking short positions.

The leading cryptocurrency fell more than 3% and briefly dropped below $98,000. Meanwhile, Nasdaq futures fell 3.5% and artificial intelligence giant NVIDIA lost 10% in pre-market trading.

Sales came shortly after President Donald Trump signaled support for a crypto policy working group, but dampened market optimism by avoiding approving a US Bitcoin reserve.

Simultaneously, the emergence of DeepSeek has shaken the technology sector, as its success demonstrates that low-cost artificial intelligence models could disrupt US-based incumbent firms.

Despite the downward trend, negative funding rates have historically signaled local price bottoms in BTC. Additionally, there is a risk of a short squeeze that could push prices up again as bears close their positions.

However, analysts warn that the rate of funding rate change remains narrow and it is too early to label shorting BTC as an overcrowded trade.