Bitcoin Experiences Local Bottom as Short-Term Holders Exit Amid ETF Outflows and Negative Funding Rates

Many metrics indicated that Monday's drop in bitcoin looks like a classic local bottom.

During this decline, funding rates turned negative. U.S.-listed ETFs saw their first outflows since mid-January.

Short-term bitcoin (BTC) holders exited the market at a loss on Monday. As prices fell, derivative traders also gave up, leading to a significant drop in open futures contracts on the Chicago Mercantile Exchange.

According to Glassnode, short-term holders are defined as addresses that have held coins for less than 155 days. These holders transferred over 21,000 BTC, worth about $2.2 billion, to exchanges at a loss. This occurred as the largest cryptocurrency dropped by 4.7%, marking its biggest decline in two weeks, based on CoinDesk Indexes data.

This transfer to exchanges often hints at upcoming sales. It was the second-largest transfer this month. It seems buyers who purchased when prices were near record highs around $108,000 at the beginning of the year became nervous with the sudden dip back into five-digit territory.

These addresses typically belong to active traders, new market entrants, and less experienced investors. They tend to react quickly to price changes and often sell when prices fall. BTC dropped below $98,000 after a weekend announcement from the Chinese startup DeepSeek raised concerns about U.S. leadership in AI and technology.

Other market signals also suggested capitulation, which often happens at local price bottoms. For example, the perpetual funding rates for BTC turned negative. This indicates stronger demand for bearish positions. Such patterns often occur when bitcoin reaches a low, like on January 13, when it dipped below $90,000, and on August 5 during the yen carry trade unwind.

The Chicago Mercantile Exchange, a key indicator of institutional activity, also showed signs of de-risking. It experienced the largest nominal drop in open interest (OI), coinciding with a significant decline in chipmaker Nvidia (NVDA). The nominal bitcoin OI fell by a record $2.4 billion, which is equivalent to 17,000 BTC. This drop pushed the basis lower, according to Glassnode data.

Additionally, U.S.-listed bitcoin exchange-traded funds (ETFs) faced substantial outflows totaling $457.6 million. A similar outflow was recorded on January 13, according to Farside data.