Bitcoin market sentiment has shifted to a bearish outlook, following a significant 700-point drop in Nasdaq futures. The aversion to risk in the market is driven by fears that the Chinese AI startup DeepSeek could pose a serious challenge to U.S. technological dominance, particularly in the AI space.
Bitcoin’s perpetual futures funding rates, which represent the periodic payments between long and short positions, have turned negative, according to Velo Data. This shift signals increased bearish sentiment as traders take short positions, betting on further price declines.
The leading cryptocurrency has fallen more than 3% since early Asian trading hours, briefly dipping below $98,000. Nasdaq futures have also dropped by over 3.5%, with NVIDIA, a key player in the AI sector, seeing a 10% decline in pre-market trading.
“The current sell-off follows President Donald Trump’s recent decision to approve a crypto policy working group, although he stopped short of confirming plans for a U.S. bitcoin reserve,” said Petr Kozyakov, co-founder and CEO of Mercuryo. “At the same time, the rise of DeepSeek, a Chinese AI startup, is unsettling tech stocks, as it demonstrates that AI models can be built more cost-effectively than those from established U.S. companies.”
Historically, negative funding rate flips have often marked local price bottoms, and there is always the potential for a short squeeze—when bears are forced to close their positions, driving prices higher. However, given the recent narrow shift to a bearish funding rate, it’s still too early to label shorting Bitcoin as an overcrowded trade.
