The funding rates for BTC and ETH are recovering, but recovery does not equal reversal.

Coinglass data shows BTC's funding rate has returned to around the 0.0100% baseline, while ETH has risen above the 0.005% threshold, indicating an overall neutral-to-weak sentiment. Compared to the deeply negative rates a few weeks ago, short-selling sentiment is indeed receding, but longs and shorts have not formed a unified direction.

Behind this recovery is a tug-of-war between two forces: on one side, shorts are being squeezed during the bounce; on the other, continued ETF outflows and macro uncertainty prevent longs from adding positions aggressively. When funding rates move from extreme to neutral, it often means the market is searching for a new equilibrium, not the start of a trend.

For traders, a neutral funding rate environment is harder to navigate than a one-sided market. Over the past month, Bitcoin has oscillated repeatedly in the $58k–$63k range, with each breakout accompanied by a rapid rise in funding rates that were then pushed back down. This indicates that the market currently lacks sustained capital inflows to support a trending market.

What’s worth noting is that the funding rate recovery phase can easily create the illusion that "bad news is fully priced in." If there are unexpected changes in macro data or regulatory policies, the neutral rate could quickly turn in either direction, depending on which side breaks first.

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