Bitcoin's price may be wavering, but on-chain and derivatives data are painting a constructive picture. Investment firm VanEck has flagged two historically bullish signals firing simultaneously: negative funding rates and a hash rate drawdown. Are we on the verge of a rally?
The Signal
VanEck highlights in its latest report that the 7-day average funding rate has dropped to approximately -1.8%, its lowest level since 2023 and in the 10th percentile of all readings since late 2020. This comes as Bitcoin's realized volatility fell from around 56% to 41% as US-Iran tensions eased. The negative funding indicates that short sellers are paying a premium to maintain their positions in perpetual futures, typically a sign of excessive bearishness. Historically, such episodes have been followed by sharp rallies as shorts are forced to cover.
Historically, periods of negative funding have been followed by strong returns. Since 2020, Bitcoin's average 30-day return during negative funding periods has been 11.5%, compared with 4.5% across all periods, with a 77% hit rate for positive performance. When annualized funding sank below -5%, subsequent 30-day returns averaged 19.4%, and 180-day returns reached 70%. These figures suggest that the more extreme the negative funding, the greater the potential for a rebound. However, the current macroeconomic backdrop of high interest rates and geopolitical tensions could influence the magnitude and speed of any rally.
“"Both mining rate drawdowns and negative funding rates have been associated with strong forward BTC returns. As such, we have become increasingly bullish on bitcoin," the analysts wrote.”
On-Chain Data
- Funding Rate: The 7-day average dropped to -1.8%, the lowest since 2023 and in the 10th percentile since 2020. This level is significant because it indicates shorts are paying a high premium, which has historically preceded bullish moves.
- Historical Returns: Since 2020, average 30-day returns during negative funding is 11.5% (77% hit rate). With annualized funding below -5%, 180-day returns average 70%. These numbers reinforce the thesis that extreme negative funding is a contrarian buy signal.
- Hash Rate: The 30-day moving average hash rate fell to the 16th percentile over 30 days and 9th percentile over 90 days. Mining difficulty is at the 5th and 6th percentiles on those horizons. This indicates miners are disconnecting rigs, possibly due to cost pressure or price declines.
- Hash Rate Drawdowns: Three sustained drawdown episodes since December 2025, the densest cluster since China's 2021 mining ban. The latest drawdown of about 6.7% ended on April 15, 2026. These drawdowns often coincide with market bottoms as inefficient miners exit and the network strengthens.
- Derivatives Activity: Put premiums relative to spot volume are more than six times their April 2024 level, reflecting guarded sentiment rather than capitulation. This suggests investors are buying protection but without widespread panic.
Market Impact
The combination of negative funding and hash rate decline has historically preceded significant rallies. Across seven completed hash rate drawdowns, Bitcoin was higher 90 days later in six cases, with a median gain of 37.7% and a 63.1% median gain over 180 days. Additionally, 19 of the top 50 180-day return windows since 2020 began on days with negative funding, despite such periods representing only about 13.6% of the sample. This indicates that the current signals have high predictive power, though they do not guarantee outcomes. The derivatives market shows investors are paying elevated put premiums, which could be interpreted as excessive hedging that, if unwound, could fuel an upside move.
However, not all signals are unambiguously bullish. Long-term holders (7-10 year and 10+ year cohorts) increased spent volume to the 85th and 90th percentiles of the past four years. VanEck stresses that such movements do not always represent outright selling, but they could indicate distribution. Active supply over the last 180 days slipped to 28.4%, signaling greater holder dormancy, which is typically bullish long-term. Nevertheless, if long-term holders are distributing, it could cap short-term upside. It is crucial to monitor whether these transfers convert into actual sales on exchanges.
Your Alpha
For traders and investors, the current signals offer a tactical opportunity. Extreme negative funding has been a reliable contrarian buy signal, and hash rate drawdowns often mark market bottoms. However, the cautious sentiment reflected in elevated put premiums suggests the market is not positioned for a rally, which could amplify any upside move. The key lies in risk management and patience for confirmation.
- 1Buy the weakness: With funding at 2023 levels and hash rate at multi-year lows, the risk-reward for Bitcoin is favorable for long positions with a 30- to 180-day horizon. Consider scaling in to mitigate volatility.
- 2Watch the hash rate: A sustained recovery above the 50th percentile would confirm miners are reconnecting, historically coinciding with the start of bullish trends. If hash rate fails to recover, the signal may weaken.
- 3Monitor options sentiment: If put premiums begin to decline, it could signal the market is starting to price in an upside move, a time to increase exposure. Conversely, if premiums continue to rise, it may indicate further fear and potential downside.
Next Catalyst
The market will be watching the evolution of US-Iran geopolitical tensions, as an escalation could increase volatility and delay a rally. Additionally, the Fed's May meeting and April inflation data will be key for risk assets. A dovish Fed stance could boost Bitcoin, while a hawkish surprise might prolong the correction.
On the mining side, difficulty could continue to adjust lower, relieving pressure on less efficient miners. If Bitcoin's price holds or rises, hash rate could stabilize, reinforcing the bullish signal. Investors should watch earnings reports from publicly listed miners for clues on sector health.
The Bottom Line
VanEck has presented a compelling case: two historically bullish indicators are aligning. Negative funding and hash rate drawdowns have been reliable precursors to rallies, with average returns of 11.5% in 30 days and 70% in 180 days when funding is extreme. However, risks remain, including potential distribution by long-term holders and geopolitical uncertainty. For investors with a medium-term horizon, the current setup offers a favorable risk-reward window. Positioning now could be the right play if history repeats, but always with proper risk management and without excessive leverage.
