ChainThink report, March 5: Independent crypto analyst Axel posted that the Bitcoin perpetual contract funding rate chart shows the funding rate has remained persistently negative throughout February and early March 2026, indicating short dominance in the perpetual futures market.

Since late January, the funding rate has frequently dipped into negative territory, and over the past two weeks it has stayed there with minimal rebound. The most extreme readings occurred on February 28 and February 25—days when prices were testing local lows around $64K to $65K. As of March 4, the rate remains slightly negative, but the cumulative two-week negative funding rate indicates a sustained short bias among open positions.

A negative funding rate means short position holders pay fees to long position holders to maintain their contracts, signaling a prevailing bearish sentiment. Historically, this condition either foreshadows a short squeeze should an upward impulse emerge, or confirms a continued downtrend if declines persist. The key trigger for a sentiment reversal is a sustained positive funding rate, concurrent price consolidation above critical resistance (around $70K), and stabilization or growth in open interest.

Additionally, the dollar-denominated Bitcoin futures open interest chart shows a decline from a peak of $47.6 billion in October 2025 to $20.8 billion in March 2026. While part of this drop can be attributed to BTC price depreciation, the overall dynamic points toward reduced derivatives leverage during the correction phase.

Dollar-denominated futures open interest has fallen by more than half since its October 2025 peak ($47.6B) and is down roughly one-third from the January high ($32B). As of March 4, open interest stood at $20.8B—the level last seen before the 2025 bull run began. Over the past seven days, open interest dropped another 3.2%, indicating deleveraging continues, albeit at a slower pace.

Declining open interest alongside falling prices signals forced or voluntary liquidations, confirming that the market is shedding leverage. This distinguishes the current environment from typical short squeeze scenarios, where lower open interest levels typically mean less mechanical fuel for cascading liquidations—though localized squeezes remain possible. The risk of further downward cascade liquidations is now lower than it was in January.

Overall, these two indicators paint a more nuanced picture than initially apparent: leverage has exited the market (open interest dropping from $47.6B to $20.8B), yet the remaining participants are predominantly short-biased (negative funding rates). This combination reduces the risk of downward liquidation cascades but also limits the potential for spontaneous short squeezes—the system has less fuel.