Analysis: Rally on the Cards as Bitcoin Derivatives Flash Extreme Pessimism

Bitcoin’s derivatives market has reached what Real Vision’s Jamie Coutts is calling a state of “excessive pessimism” after his Derivative Risk Score hit 1. Furthermore, the analyst said BTC’s 7-day moving average funding rate has fallen to the third percentile of all readings made since 2020.

But according to him, in the past, similar sustained negative funding ultimately gave way to huge upsides, with median 90-day gains of more than 43%.

Derivatives Data Show Extreme Bearish Positioning

In a post on X on April 13, Coutts looked at 14 times since 2016 when the main cryptocurrency had negative funding for at least 20 days, and the data revealed that after these periods ended, the average return over the next 30 days was 20.8%, with 12 out of the 14 cases ending positively. At the 90-day mark, median returns reached 43.5%, and 11 of the 14 days finished positive.

According to Coutts, there are three close comparisons to the situation currently being experienced: one happening during the 2018-2019 crypto winter, another occurring in 2020 during the COVID crash, and a third that followed China’s banning of BTC mining in 2021.

Soon after all those instances, which involved no less than 48 days of sustained negative funding, there were some pretty big upticks for BTC, with the asset returning 73.4% after 90 days in 2018-2019, 43.5% after the COVID dip, and over 42% in the aftermath of the China Bitcoin mining ban.

The researcher noted that the negative funding stretch from February to March 2026 was the third longest, having gone on for 50 days, with only the run in 2018-19 and the one in 2021 going on longer than it at 83 days and 53 days, respectively.

If those past episodes are anything to go by, then that 50-day period of bearish derivatives positioning could be the setup for a similar recovery.

However, Coutts threw in a few caveats, saying that the 14 episodes he’d analyzed were a “thin dataset” and that there were two exceptions, both in early 2018, when the perp market was “very immature,” that produced losses of 38% and 32% at 30 and 90 days, respectively.

“The signal doesn’t distinguish between a bull market correction and a structural bear market,” he wrote.

Short Pressure Builds As Analysts Debate Market Direction

Coutts’ assessment has come at a time when Bitcoin is trying to find its footing, following jitters that hit the market after US Vice President JD Vance announced that negotiations between the United States and Iran had failed to produce an agreement that would have ended hostilities between the two.