Since the end of May, conditions and overall sentiment in the futures markets have improved noticeably.

This shows up in the evolution of funding rates, here represented as a 30-day sum on Binance. Aggregating funding rates on a monthly basis makes it possible to identify an underlying trend, rather than being caught up in the usual noise of this particularly volatile indicator on a day-to-day basis.

After a disbelief phase, during which funding rates reflected one of the most bearish sentiments ever seen in Binance derivatives, the buildup of shorts that followed a -52% drawdown ended up fueling May's rally.

It's particularly interesting to observe how this bearish consensus has consistently shown up whenever Bitcoin was nearing the end of a correction.

It's once this phase is reached that things get truly interesting, the derivatives market picks back up through a gradual rebuilding of funding rates, driven by optimism that settles in little by little over time.

This setup is currently playing out again on Bitcoin, and if that optimism keeps building, it could well allow BTC to finally break free from this correction phase, provided spot demand joins the move as well.

Written by Darkfost